Consolidate All Your Federal Student Loans – A Guide to Consolidating Your Direct Loan
A Direct Consolidation Loan enables you to combine (consolidate) multiple federal education loan debts into a single loan. The end result is a single, more affordable monthly payment rather than several payments made throughout the month. You can combine all your federal student loans and have them paid with one easy monthly payment.
To apply, you must be a US citizen and a resident of the United States. Also, you must be enrolled in an undergraduate college and have graduated from high school or have a GED equivalent. You must have been a full-time student at a public four-year college for at least two years. Certain federal student loans such as the subsidized Stafford and Unsubsidized Stafford are available only to undergraduate students. For the other types of loans, you must be a full-time or part-time student.
Both government and private student loans may be consolidated. The main difference between the two is that private student loans have a much shorter repayment period. Thus, some borrowers choose to defer their payments until they are out of school and can no longer defer the payment.
Because of its lower interest rates, the private education loans are generally preferred by borrowers who need longer repayment periods. Also, if a borrower plans to get a degree and get a high salary, he may prefer direct repayment plans to his federal student loans. But if he has the same debts as his parents, he will probably have to go for the parent’s direct repayment plan.
There are different repayment plans for federal and private education loans. These include the standard payment plan, the modified payment plan, the income contingent repayment plan, and the income-based repayment plan. And if he plans to study online, he will have to choose an alternative repayment plan.
When you want to know what is the interest rate on a consolidation loan, it is very important to understand that there are no interest rate caps. This means that you can never pay lower than the cap. The only thing you can do is to choose a cap that is lower than your current interest rate. You also need to check whether there are any penalties for early repayment. Sometimes, lenders impose penalty charges when borrowers repay their loans before the grace period. If this is the case, the late payments could increase your total interest cost.
But if you need assistance with your finances, direct along with a reputable lender will be very beneficial. This is because direct consolidation does not involve any type of third party intervention. Neither are there any added costs. There is no upfront fee for application or for making payments toward your loan. You simply make payments toward your consolidated federal student loans until you either completely finish your education or until you choose to discontinue your education and start repaying your direct along with federal student loans.
You have two options for completing your education. One is to complete your studies within the grace period and the other is to discontinue your studies. If you select to discontinue your education first, then you will have to make the first payment toward your loan after your grace period elapses. Thus, you should make your first payment toward your direct consolidation loan as soon as possible and continue to make payments until you complete your education.
For students who wish to take advantage of the direct consolidation loan program and consolidate their federal student loans prior to consolidating any private loans, there are some important pointers to remember. First, you should keep in mind that you can only consolidate federal student loans during your grace period. This is usually six to twelve months. After this period has passed, you cannot consolidate private loans.
The second pointer is to remember that with the consolidation of your federal student loans you will be able to consolidate all of your loans. But, you must also keep in mind that you cannot consolidate more than one subsidized loan at a time. This is to ensure that you do not default on your subsidized loans. So, you cannot consolidate more than two subsidized loans. However, you may consolidate up to four subsidized loans at a time if you qualify for a grace period extension with your lender.
You may also want to reconsider whether to apply for a deferment or forbearance. With deferment, you will be able to reduce the monthly loan repayments for a short period of time. However, with forbearance, you will be charged interest at the same rate as you were, but you will not have to make any payments. These pointers will help you with your decision to consolidate all of your federal student loans.