Federal consolidation
Federal Consolidation is nothing, but an option given to the loan starved students facing trouble in re-payment of their monthly installments, to consolidate all of their outstanding loans granted with varied interest rates. By consolidating, one is switched over to a fixed interest rate, calculated by taking average of all interest rates of loans being considered for consolidation and thus the monthly installment amount becomes less than the previous all's. However, federal consolidation does not solve any real purpose, in case one is having with only fixed rate federal student loans. Federal consolidation is also not very interesting for the students covered under extended repayment options for their outstanding Federal Stafford / Direct and Federal PLUS loans. One may apply anytime for federal consolidation considerations.
Federal Consolidation Fact Sheet
With the implementation of Higher Education Reconciliation Act, 2005, borrowers are no longer permitted to apply for federal consolidation, if they are currently enrolled in schools. As per the present norms, repayment and thereby consolidation is not permitted until six months after the completion of individual student's one-half normal full-time academic course. In normal circumstances, cases of federal consolidation are considered only after completion of graduation or leaving the school, as the case may be. On eligible, borrowers need to contact with their respective lenders, online or offline, to process their application for federal consolidation. When lenders do complete processing such requests, borrowers are intimated about the consolidation loans and other related details.
Deviant borrowers may face trouble consolidating their outstanding loans. No private education loans are permitted for consolidation. Loans that are being considered for federal consolidation may include Federal Nursing Loans, Federal Perkins Loans, Direct Stafford Loans, Federal Family Education Loans (FFEL), SLS, and Health Education Assistance Loans, etc. All PLUS Loan borrowers are covered under the privileges of federal consolidation only after full disbursement of the respective loans. The main reason, why people should opt for federal consolidation is getting benefit of lower interest rates for rest of the life of loan amounts. No further increase in variable loan interest rates does affect the consolidated loans. The new interest rate is the weighted average of interest rates, with not to exceed 8.25 percent, of all outstanding loans. Major drawback of such consolidation is that borrowers do forfeit henceforth for all the privileges of any future decrease in variable rates.
Federal Consolidation for Consolidated Life
Federal consolidation has been instituted to ease the life of student borrowers and parents in some cases. By consolidating, one becomes liable only to one agency in place of multiple lenders. Monthly re-payment amount also becomes less. So, there is no reason why not to go for federal consolidation, if one is eligible enough. Once considered appropriate, borrowers may choose repayment period as anything in between 10-30 years and the respective repayment should start within two months from the date of disbursement of consolidated loans. Federal consolidation does not warrant for any consolidation processing fees or prepayment penalties. Though, the federal consolidation does lower borrower's monthly repayment, but if a lengthier period of repayment is chosen, they may need to refund higher amount of money and thus needs better considerations before going for federal consolidation.
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