Federal Consolidation Loans

What are federal consolidation loans and why should you give it a try? Well, a federal consolidation loan is a loan that is designed to assist you when it comes to managing all of your outstanding student loan debts. It would provide you with a way to combine all of these student loans into one account thus making it convenient for both you and your loan holder. Think about it, if you currently have 2 or more existing student loan debts then you would have to make 2 or more payments each and every month.

As we all know, keeping up with all those loans can be quite confusing and not to mention stressful. So why not combine them together so that you’d only have to make 1 loan payment to 1 loan holder every month. Sounds easier, right? It is. So, which loans can you include in federal consolidation loans? You can include the following:

Subsidized and unsubsidized Federal Stafford loans, Federal GRAD plus loans, Federal supplemental loans for students, Federal Perkins loans, Health professions student loans (including loans for disadvantaged students), Health education assistance loans, Federal insured student loans, Federal PLUS (parent loans for undergraduate students) loans, Federal nursing loans and other existing federal consolidation loans.

Do keep in mind that you are not required to consolidate all of your existing loans. You can pick and choose the ones you want to include and the ones that you don’t. In fact, many students actually choose to not include their existing Perkins loans because they want to maintain the forgiveness of options on those kinds of loans. Another thing to keep in mind is the fact that federal consolidation loans have its own set of pros and cons which you must understand before you apply for one.

Okay, so it would allow you to combine all of your student loans together and can help you secure a lower fixed interest rate as well as extend your repayment period which would subsequently decrease the amount you have to pay each month. But did you know that it might also make you lose eligibility for select kinds of deferment? You might also lose eligibility for select forgiveness or cancellation programs such as those provided for by the Perkins loans. So, before you consider applying for this kind of loan make sure that you take note of the above mentioned information.

Other things that you should take note of would be the interest rate on your federal consolidation loan. For this kind of loan, a fixed rate would be imposed for the life/duration of your loan. Basically, your interest rate would be the weighted average of all the loans you chose to consolidate which would then be rounded off to the nearest 1/8th of the whole percent but not exceeding 8.25 percent.

As for your repayment period, it would be extended from the typical 10 year repayment period up to 30 years depending on the total of your educational loan debt. Remember, try and understand how federal loans work before you apply for one. It would be better if you get an expert’s advice on it to make sure that this is the right way option for you to go with.

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