U.S. Department of Education Consolidation: Making Repayment Easy
Not only is college education not cheap, but it has become even more expensive in recent times. Taking out a federal or private loan for the sake of a college education is an expensive and important decision, especially because the majority of students spend a major part of their lives after college paying off their loans. In most cases, students take out more than one loan and pay for them separately. Each loan has its own interest rate, which be very draining for a “fresh-out-of-college” individual, which is why it is always good to consider the option of U.S. Department of Education Consolidation. Consolidation simplifies loan repayment by integrating numerous payments into one amount and by significantly lowering interest rates and extending the repayment period to almost 30 years. However, remember that federal loans can only be consolidated with their own kind; private loans cannot be consolidated with federal loans.
- Consolidation could result in the borrower losing any special benefits that he/she might receive from the lender. Most original loans lose their interest rate discounts, principal rebates, or loan cancellation benefits upon consolidation.
- Once your federal loans have been pooled into a Direct Consolidation Loan, they cannot be deferred. Therefore, take the time to carefully study the pros and cons of consolidation before choosing it as an option.
- Students contemplating consolidating their loans cannot do so with a PLUS loan. The parent or guardian who took out the loan must be the one to repay it.
Eligibility Criteria for Direct Consolidation
If you want to consolidate the loans you received from the U.S. Department of Education, here is what you need to remember:
- If you have defaulted on a loan, then you need to first make satisfactory repayment arrangements on that particular loan or agree to repay the new Direct Consolidation Loan under the Income-Contingent or Income-Based Repayment Plan.
- Loans which are already consolidated cannot be included in an additional Direct Loan or FFEL program consolidation.