A Student's Guide To Direct Loan Consolidation

Federal Direct loan consolidation is a program that allows you to manage your student loans. The US Department of Education's Federal Direct loan consolidation program enables you to consolidate your student loans into one new loan. The kinds of student loans you can consolidate among others are Government Stafford Loans, Federal Perkins Loans, Direct PLUS Loans, and just about all other federal student financial aid programs. The result of the is reduced monthly repayment, extended repayment period and, while not always, lower interest rate.

As various financial aid programs might have different interest rates, the consolidation overcomes this by setting a set interest. The interest is determined based on the average of the combined loan interests. The consolidation interest ranges from 0. 125% in order to 8. 25%. The average of your combined interest is going to be rounded up to the nearest 0. 125% of an entire 1% (e. g. an average interest of 4. 111% is going to be rounded up to 4. 125%). With this calculation, you might end up getting a slightly lower or higher interest. A lender sometimes gives dispensations for students giving lower interest rate or other reduction. You can consult your lender concerning the possibility of getting this dispensation.

With Federal Direct loan consolidation, you can extend your repayment period, resulting in reduce monthly repayments. You can extend the period from the conventional 10 years to 12-30 years, depending on the quantity of your consolidation. Nevertheless, longer repayment period also means greater interest. To deal with this, you can increase your repayment or prepay your debt once your financial condition is recovered.

If you encounter problems repaying your mortgage, you can contact your lender to grant you the deferment or forbearance. A deferment is a period of your time during which your lender allows temporary suspension of payments in your loans, while forbearance is a period of time where your lender temporarily reduces your monthly payment amount.