Loan consolidation can greatly simplify the costs for graduates and undergraduates by reducing multiple loan payments to one monthly payment with only one interest rate. The time period for repayment is extended, but because of an increased interest rate, the student can end up paying a lot more than each of the loans separately.
However, consolidation can make payments more affordable on a monthly basis, especially for those students that have not yet found employment, which can be a daunting task in the current economy.
Federal Direct Consolidation Loans can provide a variety of benefits for those wishing to have their federal loans lumped together into one lump sum.
FLEXIBLE REPAYMENT OPTIONS
Federal Direct Consolidation Loans provides a variety of options for repayment plans, including income contingent repayment and income-based repayment. Flexibility on payment plans allows for different and changing needs of the students to be met without them suffering a detriment, especially for those who are having trouble finding gainful employment to pay off their student loans with.
NO LIMIT ON FEES
There are no maximum or minimum loan amounts or interest fees that are required in order for a graduate or undergraduate to be qualified for a Federal Direct loan consolidation. This means that most graduates and undergraduates can qualify for their loans to be consolidated, regardless of the total balance on the loans they have. There is also no origination fee, so the initial consolidation process is free. This also puts more money in graduates pockets for them to pay off the principal of their student loans.
Deferment is where payments on the principle are delayed and only the interest rates are paid at a lower amount, usually for a period of a maximum of four years. With Federal Direct Consolidation, when this time period runs out, the deferment period can be renewed when the loans are consolidated. This can further extend the period of payment for graduates and undergraduates who are having problems making payments due to illness or financial hardship.
RETENTION OF BENEFITS
Subsidized loans are those loans where the borrower is not responsible for the interest while in an in-school, grace, or deferment status. This interest is paid by the U.S. Department of Education if the student is enrolled at least half-time, for the first 6 months after graduation (this is called the grace period), or during a period of deferment. By consolidating these loans with Federal Direct Consolidation, these benefits are retained. With other consolidation companies, the grace period is terminated once consolidation takes place.
Consolidation of federal loans can be made easy and more affordable by using Federal Direct Consolidation, as they provide many benefits for both graduates and undergraduates who are struggling to pay off their student loan debt. By consolidating multiple loans into one lump sum, payments and interest rates are reduced to one fixed rate each month, rather than the variable rate for private loans that can fluctuate each month depending on the interest rate of the market.