Federal Loan Consolidation

Approximately 50% of College students have federal student loans! To help students pay back their loans Congress established the Federal Consolidation Loan Program so that students would be able to pay back their loans more easily. This is done by combining multiple loans into one consolidated loan with one monthly payment. Not only does this alleviate multiple monthly payments but it also will help you to possibly receive a lower monthly payment by lowering your interest rate and extending the repayment period up to 30 years depending on the amount of your loans.

There are several benefits to consolidating your federal student loans. Not only will it help you decrease the number of payments you have to make in one month, it will allow you to have lower payments which means that you will have more money for other living expenses. This could include things such as transportation expenses, housing costs, daily needs and a savings account or starting a retirement fund. Another benefit to consolidating your student loans is that there are no penalties for overpayments, in other words, you can make extra payments to help pay off your loan faster which will help reduce your repayment term. The best time to consolidate your federal student loans is during the 6 month grace period following graduation or during a deferment period. During this time your variable Stafford loan interest rate is 0.6% lower than during the normal repayment period. This will allow you to continue to have a 0.6% lower interest rate for the duration of your loan consolidation. If this applies to your current situation make sure that you indicate it on your application. If this does not apply to you now you may still qualify for a federal loan consolidation but will not receive the same lowered interest rate. In order to qualify for a consolidation of your federal student loans ALL of the following must apply to you:

• You must be a college graduate, left school before completion, or currently attending school full-time or part-time.
• You currently have loans that are being repaid, in deferment, forbearance or in grace.
• Your student loans must not be consolidated with another lender.
• The minimum balance of your student loans is at least $10,000.

Other benefits with consolidating your federal student loans include no credit checks and no co-signer is required. This means that if you have no credit or bad credit you do not need to worry about being turned down because of a past problem. In fact, consolidating multiple loans into one loan might help increase your credit score by helping your income to loan ratio. You also do not need to be employed to consolidate your loans and you do not need to have collateral. It is also important to remember that it is not a good idea to combine your federal student loans with your private student loans as there are many more restrictions with private loans that would then also apply to federal loans. The best thing to do would be to consolidate your federal loans first and then apply for a separate consolidation loan for any private loans.