Advantages to consolidating student loans
Some private lenders also consolidate loans, but these cannot be consolidated with federal loans.
The Loan Origination Center’s Consolidation Department offers a complete list of loans eligible for Direct Consolidation.
If you want to consolidate a defaulted loan, you have to either make satisfactory repayment arrangements on the loan with your current loan servicer before you consolidate, or repay your new Direct Consolidation Loan under the: The interest rate for federal loans is set according to a formula established by federal statute.
The fixed rate is based on the weighted average of the interest rates on the loans at the time the borrower consolidates, rounded up to the nearest 1/8%. The consolidation rate is fixed for the life of the loan, which protects the borrower from future increases in variable rate loans but does now allow them to benefit from future decreases in variable rates.
Debt consolidation, or credit card consolidation, involves taking out a new loan to pay off multiple debts or credit card balances. Debt consolidation companies argue that borrowing money at a low interest rate to pay off loans or credit cards at a higher interest rate can save you money, or help you pay off the debt sooner.Consolidating loans through a standard repayment plan offers student loan holders a fixed monthly payment (monthly payments may go as low as ) over a fixed period of time (10 to 30 years), determined by how much you owe.There are also plans that offer graduated repayment schedules, extended repayment and fixed monthly payment options, as well as flexible plans such as pay-as-you-earn programs and income-contingent repayment plans for low-income loan holders.Loan consolidation can simplify the loan repayment process by allowing the borrower to combine several types of federal student loans and repayment schedules into one.
The repayment process is simplified because there is only one per month.First, consolidation is when you combine multiple student loans into just one loan.