Federal Student Loan Consolidation Laws

Background

The government has provided student loans since the finish of World War II. Returning soldiers expected much better treatment than their World War I counterparts. Congress not only wanted to replace with their mistakes with World War I veterans however prevent another Great Depression by re-employing the an incredible number of veterans or sending them to college who would otherwise have nothing to complete.

Which Loans Qualify

Private student loans do not be eligible for a government federal direct loan consolidation, only Federal Direct Loans and loans in the Federal Family Education Loan program like the subsidized and unsubsidized Stafford Loan and PLUS mortgage. In addition, you must not currently attend school or take more than six credit hours to be able to consolidate your loans.

Interest Rates and Repayment

When you consolidate your federal student loans the web interest rate is calculated to give a rate proportional to the quantity of each loan and their respective interest rates, along with rates capped at 8. 25 percent. For instance, if you have a $1, 000 Stafford Loan at 4 percent along with a $1, 000 Perkins Loan at 8 percent, you may expect a weighted average interest rate around 6 %.

HERA

The Higher Education Reconciliation Act of 2005 is the only germane law that most student loan holders will ever have to be worried about. President George W. Bush signed this into law in 2006 included in a "reduction" in government spending, but many criticized this bill as unnecessary because government spending increased in the areas.

Benefits

Many students choose to consolidate their loans after graduation to reduce their monthly payments and reduce paperwork, especially when they have not found gainful employment, but this comes in a cost. Increasing the payment period from 10 to no more than 30 years costs much more over time than a normal payment plan, and once you decide to consolidate it cannot be undone.