Student Loan Consolidation

If you have several outstanding federal student loans and you find yourself struggling to make the minimum payments, you may feel overwhelmed by the debt. Federal student loan consolidation may be a viable option for you to keep your loans from defaulting, or to get your loan(s) out of default status.

Consolidating your federal student loans is similar to refinancing a loan. You can choose to consolidate one loan or multiple loans. Both the Direct Loan and FFEL (Federal Family Education Loans) programs offer consolidation loans. With the Direct Loan Consolidation programs, you can consolidate subsidized and unsubsidized Stafford loans, Federally Insured Student Loans, PLUS loans, Direct loans, Perkins loans, Supplemental Loans for Students, Health Education Assistance Loans, and just about any other type of federal student loan. State and private loans cannot be combined with other loans to be consolidated by Direct Loans. You do have to meet one condition to be able to consolidate with Direct Loans: at least one of the loans to be consolidated must be an outstanding Direct Loan or FFEL.

FFEL consolidation is a bit different. The lenders of FFELs does not have to include loans that are non-FFEL loans in their consolidation. They may do so at their discretion. FFEL consolidation is handled through lenders who are federally guaranteed, which means that they give you the loan, and the Department of Education takes responsibility for the loan if you do not repay the loan.

Private loan consolidation is a bit different than using federal consolidation. If you choose to convert your federal student loans into a private loan consolidation, make sure that you understand the terms and conditions fully. Upon converting federal student loans into a private loan, you give up many of the rights you held while under the federal student loan status.

Borrowers can consolidate their loans during a grace period, once they have started repayment of their loans, during a period of forbearance or deferment, and, in certain circumstances, while in default.

If you have decided that consolidation is right for you, applying for a consolidation is relatively simple. If you choose to use Direct Loans to consolidate your loan, use the contact information sent to you on your monthly bill, or visit the Direct Loan website. Either channel will get you to the application process. The interest rate for your Direct Loan consolidation loan will be determined by the average of the interest rates for all outstanding loans to be included in the consolidation loan.

If you choose to consolidate using an FFEL loan, use the contact information on y our monthly bill to contact the lender who initiated the original FFEL loan. They can direct you through the application process. As with Direct Loan consolidation loans, FFEL consolidation loan interest rates are determined by the average of the interest rates of all outstanding loans to be included in the consolidation loan.

Private consolidation loans are completed through the direct financial institutions, so you can research to try to find the best terms for you. Terms and conditions for private consolidation loans are generally determined by your credit history and current outstanding loan amounts, so the interest rate will generally be higher than the interest rates for federal consolidation loans.

Should you have any questions during the consolidation process, contact the Department Of Education or your Direct Loan/FFEL lender. They can assist you in finding the information that you need.