Best Option For Students: Federal Consolidation Loans

Apart from the private financial institutions, there is another type of loan consolidation program that debtors with multiple loans can opt for, and this is offered by the U.S. federal government.

The federal consolidation loans that are the easiest to obtain are those loan programs for students, which makes a lot of sense. After all, students and recently graduated students are the ones that need a lot of help when it comes to finances. With little or no source of income, they actually have to pay the whole gamut of student loans, medical bills and credit card debts.
The U.S. Department of Education thankfully has loan programs in place that consolidate all federal education loans and allows students to pay for these loans through a single monthly payment.

If you have a multiple student loans, you should know that you actually have the right to consolidate your loans under the Higher Education Act, which created the federal consolidation loans under the Direct Loan Program and the Federal Family Education Loan (FFEL) Programs.

Of course, under the federal consolidation loan programs, only the federal loans can qualify for consolidation. To obtain a Direct Consolidation loan, you must already have at least one federal loan under the Direct Loan or FFEL program. The loan or loans, in addition, must be in any of these statuses: "grace period", "in deferment" or "in default".

The US Department of Education's Federal Student Aid can give out more details to help you in your consolidation efforts. Aside from FFEL loans, there is also another type of loan - the CBSL loans. Between the FFEL loans and CBSL loans, there are different loan programs, including: Federal Direct Loans, Federal Parent Loans (PLUS), Federal Direct Grad PLUS Loans, Federal Grad PLUS Loans, Federal Subsidized and Unsubsidized Stafford Loans, Supplemental Loans for Students (SLS). There are also Federally Insured Student Loans, Federal Perkins Loans, Health Professions Student Loans, and Federal Nursing Loans.

FFEL loans and CSBL loans cannot be co-mingled, and you need to consolidate the different types of loans under FFEL-type or CSBL-type of consolidation loans. In any case, federal consolidation loans can greatly reduce you monthly payments into one, and reduce the payment amount up to 40%. Term payments too can be extended up to 30 years.

There are private student loans and federal student loans. If you have a mix of both, it would be wise to prioritize the federal loans. This is because loans that were granted by the United States Department of Education can have lingering effects on your finances, even beyond your graduation. The federal government can require your employers to deduct 15% of your gross salary to pay for a defaulted loan or loans. Your tax refunds can also go to the payment of your debt.

Having several federal loans at once need not stress you out. The federal government has actually provided for a solution to this stressful situation through its federal consolidation loans. Keep in mind though, that federal consolidation loans are still debts that need to be paid.

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