subject: Federal Student Loan Consolidation - What Are The Benefits [print this page] The benefit from the federal student loan consolidation is the lower monthly payments and the extended term for the loan. The consolidated federal loans have, unlike the private ones, the fixed interest rate for the life of the loan.
1. What Are The Payments And The Interest Rates?
Usually the consolidation means the extended terms compared to other loans. The borrowers can choose terms between 10 and 30 years. The short term benefit is the lower monthly payments but during the long term these loans are more costly.
The interest rates have been calculated as a weighted average of the present loans interest rates, rounded up to the nearest 0.125%, and capped at 8.25%.
2. The Reconsolidation Possibilities.
After the original consolidation you cannot reconsolidate unless additional loans are included. For example, if you consolidated your federal loans after your undergraduate degree and then wanted to also consolidate your graduate loans, you can combine the new loans with those that were reconsolidated.
3. The 4 Repayment Options.
The repayment schedule depends on how you plan your financial future. You can select between four alternatives. The standard payments means the fixed monthly payments, the graduated payments mean the gradually increasing payments, the income sensitive payments mean payments, which are tied to the amount of your income and the extended payments mean that you have to pay over some minimum amount in a certain time.
4. The Qualification.
You must have a federal loan of minimum $ 10.000, to be at the grace period or repayment period, you cannot be in a default status with any of your loans, to be a permanent U.S. resident and you have not consolidated the same loans before or have gone back to school and accrued more loans to consolidate with the original consolidation.
5. When Is The Time For The Consolidation?
There is no deadline for the federal student loan consolidation. To be eligible for the Federal Consolidation Loan under the Federal Family Education Loan program, FFEL, you have to be at the grace period, which means you have graduated max 6 months ago or then you have repaid each of the loans to be consolidated. The repayment must include loans that are in forbearance or deferment. Your fixed interest rate for the Federal Consolidation Loan will be higher if you consolidate after your grace period or approved deferment.
by: Juhani Tontti
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