Federal Loan Consolidation

The possibility of federal loan consolidation can bring needed relief to graduates who are dealing with staggering educational debt. Thanks to the Higher Education Act government loans are eligible for consolidation. Funding that was made available for educational purposes through government programs such as the Federal Family Education Loan program, or FFEL, and the Direct Loan program can be consolidated. As with other consolidating loans, borrowers are able to attain a larger amount of government insured funds to pay off previous government educational loans. This approach reduces the monthly payment for the borrower and simplifies the process of paying back educational debt. In some cases, there can also be significant savings for borrowers in the area of interest rates and lending terms. Repayment schedules can change as well. Longer pay back terms can ease the financial strain for graduates at a time when they are building their careers and beginning new lives away from a school environment. The hope behind these federal loan consolidation programs is that the borrower will find it easier to make good on any educational debt that may have accumulated while they were pursuing their degree. The easier repayment terms will hopefully mean that there will be fewer borrowers who find it necessary to default on their educational loans.

After years spent earning a graduate or undergraduate degree, many former students do not have the extra funds to handle the costs of multiple loans. Consolidating this debt may be the only means of financial survival for anyone who is just starting out in life. There are three different types of federal loan consolidation programs, the Stafford loan consolidation, the PLUS loan consolidation, and graduate financing. Refinancing in the Stafford program involves rolling existing Stafford loans into one. This funding is generally offered at a fixed interest rate and can result in significant monthly savings for the student. PLUS loans can only be consolidated if there is a minimum of twenty thousand dollars in debt or more. The third type of federal loan consolidation involves graduate loans. A benefit of this kind of debt consolidation is that it allows the borrower to pull current graduate school debt together with any earlier loans for undergraduate expenses. By bringing all of this debt together under one source of financing, the overall debt becomes much more manageable for the borrower. The Bible talks about the mighty strength of the Lord. "The LORD on high is mightier than the noise of many waters, yea, than the mighty waves of the sea." (Psalm 93:4)

Another type of funding that is specifically geared toward the graduate student is Graduate PLUS financing. Students who have already received federal loan consolidation for previous educational expenses that were accumulated while they were working on an undergraduate degree will still need financing if they choose to work toward a graduate degree. Graduate degree financing that is government insured can be used to pay for any kind of education related expense. Such expenses could include room and board, books and supplies, tuition, travel, lab costs, or any other kind need that is associated with pursuing a graduate degree. These loans generally offer a fixed interest rate. Since making regular payments would be very difficult for anyone who is in school full time and is not holding down a full time job, payments on these loans can be deferred while a student is in school. Another benefit of this type of financing is that there is generally no need for a co signer unless there is a problem with the potential borrower's credit. However, these loans are usually not granted on the basis of financial need. A potential borrower's credit history will come into play before this funding can be approved. In some cases, the funds that are acquired through these loans are paid directly to the school rather than dispersed to the student.

At times, federal loan consolidation may involve financing that was obtained by either a student or the parents of a student. There are financing and consolidating opportunities for both graduates and any parents who have chosen to help fund a child's education. Of course, there are many benefits to consolidating educational debt. The reduction of monthly payments by combining all payments into one is an obvious advantage. Credit ratings can also improve due to the pay off of previous educational debt. Many borrowers can also tailor their federal loan consolidation to their current fiscal situation. Often, this type of financing does not involve stringent credit checks or steep fees for application or origination. For parents who are making payments on a child's educational expenses, there is often no need to wait until a child has graduated to consolidate mounting educational loans.

Many graduates apply for federal loan consolidation once they realize the impact of the multiple educational loans that will kick in after the six month post graduation grace period. Rather than default on this financing and destroy personal credit ratings, consolidating these debts is a much more sensible approach. There are web sites that allow for online application when a borrower chooses to consolidate educational financing. As with any kind of borrowing, a wise consumer will shop around for the best terms and rates. Just because a lender offers government insured financing does not mean that they also offer the best interest rates and options. Any borrower who owes a large amount of debt can often find lending opportunities that extend the amount of pay off time of the consolidated debt. Some plans also allow for payments that begin at a low monthly payment that will rise over time. The thinking behind this approach is that the graduate's earning power will also increase over time and the payment can be adjusted accordingly.

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