Student loan consolidation

Student loan consolidation

In the United States both the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP) include consolidation loans that allow students to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt. This results in reduced monthly repayments and a longer term for the loan. Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan.[1][2][3]
Contents

* 1 Interest rates and payments
* 2 History
* 3 Consolidation loan lenders
* 4 References
* 5 Further reading
* 6 External links

Interest rates and payments

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.[3][2]

History

The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).[3][4]

In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs.[1]

Consolidation loan lenders

Top consolidation lenders ranked by total FY 2006 consolidation loan originations
Lender name # of loans Amt of loans ($)
Federal Direct Student Loan Program 1,169,110 $19,197,268,873
Sallie Mae 866,295 $19,841,423,841
Citibank 232,126 $4,843,119,089
Nelnet 198,624 $4,796,065,812
NextStudent 89,284 $3,320,024,025
JP Morgan Chase 115,777 $2,668,451,098
Goal Financial, LLC 111,426 $2,494,856,673
College Loan Corporation 75,360 $2,245,128,826
AES/PHEAA 166,730 $2,037,618,548
Student Loan Xpress 114,790 $1,880,997,383
Wachovia Education 80,174 $1,674,979,763

Consolidation Checklist

I found it in www.studentaid.ed.gov
Maybe it will be usefull to you.

The very first step: Take inventory of your student loans.

For information on your student loans, review your loan documents, and contact your lender or loan servicer. If you are uncertain of your current lenders or loan servicers, you can find them by going to www.nslds.ed.gov.

Monthly Payment Amount

If you are not in repayment status yet, estimate your monthly non-consolidated loan payment based on the current interest rate and your loan balance. You can get payment amounts by calling your lender or loan servicer.

Next Steps

• Determine whether your monthly payment exceeds the percentage of your income to be allocated to student loan payment. This percentage should be based on a realistic budget.
  
  --If payment exceeds monthly allocation, reevaluate budget and assess income situation.


• Consider deferment or forbearance option for short-term payment relief needs.
  
  --If debt relief needs are long term, consider consolidation.


• Select loans for consolidation.



• Determine monthly payment and total interest costs for Consolidation Loan and compare to cost of repaying loans without consolidation.
  
  --For help in calculating monthly payments, contact your lender or loan servicer.


• Consider the impact of consolidation on future deferment options, cancellation options, and other borrower benefits such as interest rate discounts or principal rebates, which can significantly reduce the cost of repaying your loans. You might lose some discharge (cancellation) benefits or deferment benefits if you include certain types of loans in your Consolidation Loan—Federal Perkins Loans, for example. To find out more about the impact consolidating might have on deferment and cancellation benefits, contact the holder of your loan.



• If you decide consolidation is right for you, contact your lender to begin the consolidation process.



• If still in the grace period, consider consolidating approximately two months before the end of the grace period to allow enough time to have your Consolidation Loan processed before the grace period expires, yet not so early that you lose too much of your grace period if you have a FFEL Consolidation Loan. (For FFEL Consolidation Loans, if you consolidate during the grace period, you give up whatever portion of your grace period remains. You retain all of your grace period, however, if you have a Direct Consolidation Loan.) Some FFEL lenders offer to hold disbursement of Consolidation Loans until the end of the grace period to enable borrowers to minimize their interest rate and maximize their grace period.



• Remember that if you consolidate during your grace period, you can lock in an interest rate at least a half percent lower than the current repayment rate.



• When filling out the consolidation application, provide complete address information, include two references, and sign the promissory note.



• If already in repayment, make sure to continue making payments on your loans until consolidation is completed.
  
  --If you need immediate payment relief, request deferment or forbearance.


• If you have questions about consolidation, do not hesitate to contact your lender or loan servicer. Check your loan documents for the toll-free customer assistance number.

From the http://www.studentaid.ed.gov

Federal Student Loan Consolidation site

Found other great site - Federal Student Loan Consolidation : federalconsolidation.org
this site will help you to:

• Lock in your student loan consolidation interest rate.
• Lower your monthly payment by extending your repayment term.
• Save money with Access Group's student loan consolidation incentives

I recommend to visit this Federal Student Loan Consolidation site.

Site about Student Consolidation

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