Federal consolidation loans are a great repayment option for student loan borrowers. These help to repay the education loans easily. The federal consolidation loans are specifically designed to help student borrowers manage their federal loans by combining all federal loans into one new loan with a longer repayment term, a smaller monthly payment and a fixed interest rate.
If you have a large federal education loan debt, or you need to make huge monthly payments, you can consider federal consolidation loans. The federal consolidation loans are ideal for student borrowers who want to lower their huge monthly payments and also for them who have a number of federal education loans with different lenders and different due dates. Most of the federal consolidation loans are guaranteed and subsidized by the federal government.
Some of the advantages of federal consolidation loans are the following:
- It significantly reduces your monthly loan payment; you should repay most federal student loans within 10 years, but a consolidation loan allows you to extend the term up to 30 years. Hence you reduce your monthly payment by as much as 79%.
- You can select different guaranteed repayment plans
- One convenient payment to one lender
- You will have fixed interest rate on your current federal loans. It sets at the time of consolidation and remains the same during the entire life of the consolidation loan. It will never increase.
- There will not be any penalty for early repayment
- There are no processing fees, employment verification and no credit checks.
- Simple loan application process: you can apply for a federal consolidation loan by simply filling an application form in minutes. You have to provide personal information, information on your federal student loans and contact information of two personal references.
Federal consolidation loans allow you to refinance your federal education loans only. The federal student loan types that are eligible for federal consolidation includes Subsidized Federal Stafford Loans, All Federal Direct Student Loans (Direct Loans), Unsubsidized Federal Stafford Loans, Health Professions Student Loans, Federal Parent Loans for Undergraduate Students (PLUS), Nursing Student Loans, Federal Perkins Loans, Federal Supplemental Loans for Students (SLS), National Direct Student Loans (NDSL), Health Education Assistance Loans (HEAL), Auxiliary Loans to Assist Students (ALAS), and Federally Insured Student Loans (FISL).
Though federal consolidation loans have various advantages, you need to think twice before consolidating your federal student loans because you cant take advantage of any further decrease in the interest rate; as the repayment term lengthens, the finance charges also increase, and you may pay more interest rate over the life of the loan. You can find various federal loan consolidation lenders in the market. Always select a lender and a repayment plan that will suit your financial situation. You can also consider the words of your financial advisor.