The federal government, through the Department of Education, offers different student loan consolidation services that do not have a minimum credit requirement to qualify. These federal consolidation options can give you the benefit of having a single bill while lowering your payments. However, these options are only applicable toward federal loans and cannot be used for private loan consolidation.
A federal consolidation may be a good option if you need to consolidate your loans to be eligible for certain income-driven repayment or public service loan forgiveness. For example, consolidating can be helpful to apply for Federal Family Education, Perkins, or parent PLUS loans.
If you want a single federal loan payment but do not necessarily need to lower your monthly payment by a significant amount, a federal loan consolidation may be helpful. These federal consolidation options can also help you out of a bind if you are defaulting on student loans and want to recover your financial situation.
When you secure a student loan consolidation from the federal government, your previous loans will be paid off by the government and you will receive a new direct consolidation loan. Typically, you will be eligible for these student loan consolidation programs after you graduate, leave school, or your schedule drops below half-time enrollment.
One of the primary benefits of consolidating federal loans through the Department of Education is that the process is free unlike many private lenders that charge a consolidation fee. After consolidating your federal student loans, you will receive a new fixed interest rate that will be the weighted average of your previous rates.
When you receive your new direct consolidation loan from the Department of Education, the new loan term will range from 10 to 30 years. Generally, your repayment term will begin within 60 days of when you first received the disbursement for the consolidation loan. The disbursement amount will be based on the total of your federal student loan balance and a variety of other factors.
Consolidation is a good way to simplify your payment, so you don’t have to manage making payments to multiple loans each month. However, federal student loan consolidation is not the only option available. Try using a consolidation calculator to compare different plans so you can determine which works best for your current financial situation.
Continue reading to learn how you can apply for private and federal student loan consolidation programs today.
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