Federal loan consolidation is included in the Federal Family Education Loan [FFEL] Program. The federal government designs it. This loan is a type of student debt consolidation loan that reduces burden of multiple monthly installments of student federal loans into a single monthly installment. Several types of loans can be consolidated in one federal consolidation loan featuring lowered and fixed interest rate. No matter, whether existing federal loans differ largely in features and lenders, a loan consolidation program combines them into a single loan with a single monthly payment.
The repayment period of currently used loans determines whether the user of those loans can combine them in a student consolidation loan. As per the laws regulated by FFEL, users who have already entered the repayment period of the loan or in the grace period can consolidate their multiple loans. If the loans have crossed the grace or repayment span, higher interest rates are counted for consolidating them. Since the purpose of consolidation is to reduce rates, therefore, such higher fixed interest rates do not serve the purpose of debt consolidation. Hence, loans that have exceeded the repayment or grace period are no longer eligible to be consolidated.
Opinions on how to choose a student federal loan consolidation lender vary greatly. Some may approach,
Each way is right as long as the student loan consolidation companies you select have suitable federal consolidation programs in place. Many lenders offer special reward benefits for on-time payments such as special discount for 36 to 48 months on-time payments and additional interest benefits or money saving repayment incentives like instant interest discount for automatic debit withdrawal.
Before you approach a lender for student federal loan consolidation service, find the loans are eligible to be consolidated under federal loan consolidation plans. If you owe debts in some of the following federal loan programs, you can surely go ahead with debt consolidation -
Non-federal loans like some private loans, loans taken from relatives or family members and some school-based loans are excluded from the list of eligible loans that can be combined under student federal loan consolidation program.
