School Loan Consolidation
School Loan Debt Consolidation
By Sam Ferdi
School loan debt consolidation
School loan consolidation is a single loan acquired to secure payment of various student loans. If you can’t afford to make the payments on your school loan, you go to a bank or another lender and apply for a school loan consolidation. Before getting your school loan consolidated, you need to have thorough information about school loan consolidation process.
Two major categories of school loan consolidations are:
1. Federal Loan:
This type of school loan consolidation provides financial help to those who are enrolled at schools that participate in federal aid programs.
Federal consolidation loans are divided into two major categories:
o Federal Family Education Loan (FFEL) program
o Federal Direct Loan program.
Federal Family Education Loan program offers loan from private lenders.
US department of education have introduced Federal Direct Loans for the convenience of the students. This program offers the following loans:
Direct Subsidized Consolidation Loans: These loans are eligible for interest subsidies, such as subsidized FFELP and Direct Loans, and Federal Perkins Loans.
Direct Unsubsidized Consolidation Loans: These loans are not eligible for interest subsidies
If you want any of your unsubsidized loans to be consolidated, then you will receive an Unsubsidized Direct Consolidation Loan.
Direct PLUS Consolidation Loans: These loans combine FFELP PLUS and Direct PLUS loans.
Benefits of Federal Loan:
- Reduces monthly payments
- Provides fixed interest rates
- Requires only one payment every month
- Improves credit rating
- Offers flexible payment options
- No pre-payment penalties
2. Private loan:
The purpose of private school loan consolidation is more or less the same as that of federal loan consolidation but the procedure and features differ. Private loans cover educational expenses like tuition, accommodation or any other educational expenses.
Benefits of private loan:
- Improves the payment history and credit score
- Gives competitive interest rate against non-government loans
- Consolidate all private and non-federal educational loans
- Consolidate education-related debt as well as education-related credit card debt
- Enable you to write fewer checks and may also lower down the monthly installments
- Longer repayment term (up to 30 years in some cases)
- Lower monthly payment
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