Federal Consolidation Loan Program

A federal consolidation loan program seemed to be the perfect solution for young Mr. Jack Spratt who thought that as soon as the mortarboard was thrown in the air the world would be his oyster. Sadly, there had been few oysters but a lot of mac and cheese for the young man because only entry level positions for a bachelor's degree seemed to be the order of the day. As a result, his three different educational loans plus an apartment and car expenses were choking the financial life out of the young man. Mr. Spratt called the Department of Education hotline number to get as much information as possible. A federal consolidation loan program seemed to be the young man's best hope.

Before calling the Department of Education, the young man had considered getting a bank loan, but credit history had not been established for an approved length of time. A trip to a lending company had proven to be a real education because this genre of lender wanted almost twenty percent to provide an unsecured lending agreement and the student's student loans were presently at less than eight. The lending company offered to stretch the man's payments on this agreement out ten years longer than the loans were now set to pay off, making his payments about a hundred dollars month less than the three totaled now, but the cost would be several thousand more dollars in the end. Spratt decided that if it was a choice between an extra hundred a month or more mac and cheese, the cheesier option won out. The federal consolidation loan program was next on the radar.

In considering the idea of synthesizing three federal loans into one, the counselor asked some pertinent questions. Did Mr. Spratt feel the monthly payments were manageable, did having three different accounts sometimes make paying them more difficult and what were the interest rates on each of the accounts? The answers were no, yes and eight percent, so then the counselor asked the young man how much could be afforded each month and how much was left on each existing account. While there is an online calculator at the Department of Education website to help with the exact federal consolidation loan program figures, the counselor did the figuring for the young bachelor. In addition to seeing how the numbers would fall out, there were some other considerations that needed to be addressed.

First, not just any loan can be eligible for the federal consolidation loan program. Personal loans made by a state or private lender not insured by the federal government cannot be rolled into such a consolidation type of lending agreement. Other lending agreements such as primary care loans, law access loans, medical assist loans and PLATO loans which are educational loans made by the Wells Fargo Bank are also unqualified for federal consolidation loan program. Loans that are available for the consolidation loan programs include direct subsidized and unsubsidized lending agreements, Stafford loans, PLUS loans, Perkins loans, nursing student loans, national defense student loans and many more than must be verified by visiting the Department of Education website. Even these eligible lending agreements must be in one of four states of process: grace, repayment, deferment and default.

A state of grace or forbearance for these federal consolidation loan program lending agreements means that in certain circumstances a student may reduce the monthly payment down to a much smaller amount for a set amount of time. Circumstances such as severe illness, un-employment beyond the maximum deferment period, or a life changing circumstance, which doesn't mean buying a new car! Repayment simply means that the student is making the mandatory payments. The third approved state for consolidation consideration is that loans be in a position of deferment which means that in certain situations only the interest on the loan is being paid. This might be a condition for a medical student or a member of the Armed Forces on active duty. Surprisingly, the final state a lending agreement can exist in to qualify for eligibility in the federal consolidation program is default. This state of a loan occurs when a student just stops paying on the lending agreement altogether.

For those graduates going into teaching, a program better than any federal consolidation loan program is the teacher loan forgiveness program. For certain types of teachers choosing to enter economically challenged areas of the country, the ability to have debts just erased is a very compelling option. There are a number of distinct qualifications for this kind of debt forgiveness, but those meeting the requirements should absolutely explore these great possibilities. For Mr. Spratt, his bachelors was in the powerful craft of basket weaving so there were no possibilities for loan forgiveness. Christians must take their testimony seriously. "Let your light so shine before men that they may be able to see your good works and glorify your Father which is in heaven." (Matthew 5:16)

For a student in school now, it is important to know that handling one's credit privileges at this very moment may affect the ability to get federal consolidation money later. In fact, handling credit poorly while in school may result in having to be saddled with much higher interest lending agreements later. Seek all the help that the Department of Education can offer. There are many options for consolidating loans. Repayments options abound and can be changed at any time. Whatever consolidation plan is chosen, make sure it is one that can be comfortably repaid. The US government has a long arm when it comes to chasing down those who default on student loans.

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