Direct student loan consolidation
Direct Student Loan Consolidation
is combining of all the existing student loans of a person into a single student
loan. This provides a great relief to the loan-holder as all the other existing
student loans are nullified after consolidation. A monthly loan repayment
plan is devised for the consolidated student loan. Student loan consolidation
is a good way to ease off the burden of repayment of a number of existing
student loans. This also reduces the possibility of forgetting the deadlines
put forth by different student loans.
Sometimes it also happens that a person tends to miss the repayment deadlines of one or more of his/her loans owing to pressure of several kinds - mental, financial and personal pressures. Such stresses inversely affect the working of a person. In such cases, people do tend to forget their responsibilities, and crossing the deadlines thus result in higher rate of interest charged for late repayment. Student loan consolidation provides flexible and comfortable monthly loan repayment options. It provides low rate of interest which is fixed at the time of monthly repayment plan. At present, the law states that student loan consolidation rates can be charged up to 8.25%. It cannot exceed this limit set by the law.
The monthly loan repayment plan is prepared depending upon the financial strength of a person, considering the standard repayment term of 10 years. There are several kinds of student loan consolidation programs, some of them are stated here below: Federal PLUS Loan Consolidation Direct Loan Consolidation Perkins Loans HEAL Loans Federal Family Education Loan (FFEL) While the above stated student loan consolidations carry all the benefits of loan consolidation stated by law, Private Student Loan consolidation does not provide federal loan benefits. Thus a person needs to research his options well before opting for any student loan consolidation program. Direct Student Loan Consolidation helps a candidate to finance his/her college education. Direct Loan Consolidation is a program that enables a borrower to consolidate one or more of his/her federal student loans
into a single new loan for various advantages. Some examples of federal student loans include: William D. Ford Stafford Loans William D. Ford PLUS Loans Direct Stafford Loans Direct PLUS Loans Direct Consolidation Loans Federal Insured Student Loans Nursing Student Loans National Defense Student Loans Federal Perkins Loan The borrower also has federal student loans if he/she receives his/her loan bills from the Direct Loan Servicing Center, or his/her loan bills have William D. Ford Federal Direct Loan Program printed on the bill. Also, if the borrowers school is a Direct Loans Lending School, his/her loan can be termed as a federal student loan. All loans combined under the Direct Consolidation Loan have only one lender - the U.S. Department of Education. It is important to note that student loans that come under In-School Status cannot be included in a Direct Student Loan Consolidation. In-School status is the position of a loan before entering the grace or repayment period. The payback period of direct loan consolidation ranges from 10 to 30 years, taking into consideration the total amount of education loan of an eligible candidate. The process of loan consolidation generally takes 60 to 90 days once the application is submitted for the same. Direct Consolidation loans can either be Subsidized, Unsubsidized or PLUS. For Subsidized loan, a borrower is not responsible for the rate of interest while he/she is in an In-School status, grace or deferment status. Unsubsidized loans hold borrower completely responsible for paying the interest. The interest on such loans accrues from the date of disbursement till the loan exists. PLUS loan is a kind of unsubsidized loan that is provided to parents of dependent graduate students. According to the U.S. Department of Education students who are studying in school or students who are in their grace period or they, who drop below half-time enrollment are not eligible for government student loan consolidation. Various Student loan consolidation programs lay various eligibility rules. For instance, in order to qualify for William D. Ford Direct Student Loan Consolidation, a person must possess at least one of the following mentioned loans: A Direct Stafford subsidized/unsubsidized loan At least one Federal Family Education Loan According to the U.S. Department of Education, there is no minimum/maximum amount of federal loans required in order to process direct consolidation. Advantages Direct loan consolidation program offers various advantages to suit the requirements of the borrowers. The government has devised four different repayment plans for direct consolidation loan. They are: - Standard Repayment Plan which offers fixed rate of interest on monthly payments for up to 10 years. Extended Repayment Plan which offers a lower amount of fixed monthly payments for repayment term of 12 to 30 years, depending upon the total amount of loan.
Graduated Repayment Plan which fixes a certain amount of monthly payments that increase every two years. The repayment term here, varies from 12 to 30 years depending on the total amount of loan borrowed. Income Contingent Repayment Plan (ICR) which offers a repayment term of 25 years with monthly payments depending upon the borrowers annual income, total amount of direct loan and size of the family he/she supports. The government also provides borrowers, the benefit of switching between repayment plans for direct loans. The only condition that prevails here is the borrower may switch from one repayment plan to another, if the new plan has repayment term longer than the time already spent in the last plan. For example, if a person has extended repayment plan but wants to change to standard repayment plan, he can do so if he/she has spent less than 10 years under extended repayment plan. The new repayment plan gets its repayment term calculated by subtracting the number of years spent under previous plan from the current plans term limit.
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