Federal programs

There are two federal student loan consolidation programs in the united states that allow a student to consolidate all student loans into one single loan:

1. The federal family education loan program
2. Federal direct student loan program

the above two programs were established to address the following loan types:

* Stafford loans
* Plus loans
* Perkins loans

The offer of fixed interest rate for the whole loan life cycle is one key characteristic of consolidation loans by federal government targeting at students.

A brief history of the federal program

The federal student loan consolidation program was created in 1986 to allow graduates with more than one federal loan to consolidate them all into one single loan package. Such consolidated loans had a variable interest rate from 1986 to 1998 but in 1998, the us congress acted to convert the variable rate to one of a fixed rate weighted average. The latter came into force on February 1, 1999. Before this time, a consolidated student loan from federal government used to have a variable rate. That rate was determined by either the university or the lender, whoever is the loan originator.

In 2005, the government accountability office (GAO) stepped in, took under consideration the savings of consolidating all of the consolidation loans. On the basis of future variations in interest rates, loan volume, percent of defaults and cost estimates from the department of education, GAO concluded that this would cost an additional $46 million. GAO also concluded that this cost would be offset by a savings of $3,100 million which was in part by avoiding a $2,500 million cost in subsidies.

Interest implications

When compared with student loans offered by federal government, the term of payment for federal consolidation loans is longer. It can range anything from ten to thirty years. Even though monthly repayments are lower, the overall cost of the term of the loan is actually higher than with other federal student loans.

The fixed interest rate is derived from using a weighted average of the consolidated loan interest rates. This is done by assigning relative weights according to the amounts borrowed and then rounded up to the nearest 0.125%, but capped at 8.25% interest. Post-graduation grace periods and special forgiveness circumstances are two features of the original loans that have not been carried over to the consolidation loans.

Don’t rush to decide

if you have existing loans that cost you considerable money, despair not. Consolidating your loans may be the way to go. However, it is important to appreciate the fact that federal student loan consolidation is not always suitable for every borrower with federal student loan payment.

Ray Young trains elementary school trainee teachers part-time at a teacher training college, and is passionate about helping people becoming financially more prudent and independent through writing and publishing online. He writes on topics like Health Care Insurance. Making it to college or university will be one of the best things that you can ever do to get to the places you want in life. Never let money come in the way to stop you from going to college when you can’t pay for the education yourself. To get all the insights and help you need on How To Financially Support Yourself Through College, check out Student Loan Consolidation.

Student Loans Consolidation Questions & Answers

Question: Are there any banks or agencies still doing student loan consolidation?
I’m a recent college graduate, and it seems that all of the banks which used to offer consolidation services are no longer. Do you know of any banks or loan agencies that are still consolidating?

Answer: All of the banks should be doing that because student loans are protected from bankruptcy. You just need to find a bank with the capital to purchase your loans. Look at midwestern founded banks and some that really specialize in student loans like western union.

Question: What to do about student loan consolidation?
Hi all. I graduated college last May and will begin repayment on my loans starting in November. I have 7 federal student loans, totaling about $62,000 and 1 private student loan totaling about $8,000. Many places are not offering federal student loan consolidation any more, and I only have one private student loan so it doesn’t make sense to take out a private consolidation loan. As of right now, my payments are going to be about $800 monthly starting in November. I can’t afford that! What can I do?

Answer: Because of the student loan reform act many lenders pulled out of the consolidation field. The ones that remain do so on a limited basis. Generally once they reach their monthly quota of loans they stop taking any others. This means you’ll likely need to check sites like http://www.studentloanconsultants.com for their list of lenders every week to see who is or is not offering consolidation loans at that time.

Unfortunately there is no easy way of doing it at this point, but just be patient and you’ll find a lender to do the consolidation.

Question: What is the best student loan consolidation company?
Recently, I consolidated my student loans (undergrad, grad school loans). After I received the final break down, it appears that I will be paying double over the 25 year pay back period even with a 6% interest rate. This is ludicrous and certainly NOT what the agreement stated. I need to find a better company with better rates and soon.

Any suggestions – help!!! This company is really not the best and I plan to change soon. Send links and your advice on how they have helped you!

Answer: When you consolidate your loans and extend the repayment period to 25 yrs (instead of the standard 10 yrs on federal loans) this increases the total amount of interest you pay over the life of the loan. Credit cards and other loans work the same way. Remember, the monthly payment is just the *minimum* you need to pay. Paying more than that each month will reduce the total interest you pay on the loan.

You federal loans can’t be “reconsolidated” unless you have a new (unconsolidated) loan to add to the amount.

Sallie Mae is the largest lender and consolidator of student loans and they offer a lot of great info on their site, including an FAQ and a calculator so you can see what your payments will be.
student loan consolidation information:

http://www.salliemae.com/after_graduation/manage_your_loans/consolidate_student_loans/student_loan_consolidation.htm

reconsolidating student loans: http://www.salliemae.com/after_graduation/manage_your_loans/consolidate_student_loans/reconsolidate.htm

Question: How do I go about choosing which student loan consolidation program to go through and why consolidate?
Current student trying to get a head start on paying off my loans which companies are the most legit and what should i look for? Also why should/shouldn’t one consolidate?

Answer: I’m not sure you can consolidate your loans if you are still in school. Are these government loans or private loans? If government, are any of them subsidized loans? If they are, this means they are interest free until you graduate and consolidating might affect that.

Consolidation is a way of locking in a lower interest rate for the life of the loan, and many companies offer bonuses like cash back for 1.25% of the loan after 24-months of payments. Interest rates on loans vary as the economy varies. By consolidating, you lock in the current rate forever. With current rates being close to 8%, I would not recommend consolidating at this time. When rates FINALLY go back down to 6 or 7%, you will be stuck at 8%. Unless you hear that rates are suddenly jumping to 12% in 3-months, hold off.

Question: Whats the best way to go about student loan consolidation?
I have a bunch of student loans and i get a lot of junk mail about consolidating. Who is the best to use for consolidating? What type of payments and interest rates can i expect. I have about 8 different student loans out there, from 4 years of school. Some are private, some are federal.

Answer: Go with a reputable company which has had good reviews. Ask your friends or other grads/students on who they are working with and ask for feedback.

8 loans!? wow… Its probably time for you to consolidate them into one big payment instead of paying 8 loans monthly isn’t it?

Read more on the link below… also don’t forget to go to your student union or student services and ask for some advice.

Question: Can you apply for a student loan after debt consolidation?
if you already have one loan, what if it’s differed due to disability? How does this work?
Can you apply for a student loan after debt consolidation?
if you already have one loan, what if it’s differed due to disability? How does this work?
At the time the first loan was taken out (it was for around 4,000 and it was to a school that was a scam, but they got away with itbecause they knew the ins and outs of pulling off their scam very well. . so I’m asking about applying for another loan / consolidation, not discussing the previous one.

Answer: They will see that you already have a loan when you have to give them your SS #. You will have to tell them about the previous one. Sorry you got scammed.

Question: Anyone know of a best place for private student loan consolidation?
Hey there, I am looking to consolidate my private student loans, I have a total of about $30k. Anyone know of a place that offers the best interest rate?

Thanks for any help.

Answer: Ditto what Bob K said. It’s what I plan to do with my private loans – but here’s more information for you:

The Sallie Mae private loan consolidation program started at the end of April. They do a credit check, and depending on your FICO score you can get a rate that starts at prime and then moves up from there if your score is less than perfect. *But*, you can get a cosigner with excellent credit and get a rate closer to prime, and after two years of repayment you can remove the cosigner completely from the loan. The best part is that repayment can be for up to a 30 year term (maybe not for smaller balances, but ask anyway).

The White Collar Ruckus

http://whitecollarruckus.libsyn.com

Question: Does anyone know of a company offering student loan consolidation loans?
All the companies I have checked out are not offering consolidation loans because of the credit market. There is no way I can make payments with out consolidation. Someone please help!

Answer:
If you’d asked this question two years ago, I could have given you a list of about 20-25 major lenders who offered student loan consolidation. Right now, you’d be lucky to find 5.

Four companies that I know are offering private loan consolidation products right now are:

Chase
Collegiate Risk Management
EduCare Financial
Student Loan Financial Group

I can warn you that all four of these lenders will subject your consolidation application to a rigorous and conservative analysis of your eventual ability to repay.

If your loans ARE federal loans, you should start with the government’s own consolidation program – you can find that here: http://www.loanconsolidation.ed.gov/

Good luck.