Department Of Education Student Loan Consolidation - There is a little known option available to students who need financial assistance. This is a direct student loan consolidation available from the Department of Education, a practical repayment management option that enables students to bundle all of the federal direct student loans received to finance their college education into a single loan.
There are two different types of student loan consolidation through Department of Education - subsidized and unsubsidized. A subsidized direct loan means that the amount of credit you receive is based on the tuition you need.
As long as you are in school, you will not be required to make a payment and you will not be charged interest. This is the best option.
An unsubsidized direct loan means that there is a limit to the amount of money you can borrow. With an unsubsidized loan, the amount that you require is not taken into consideration.
Advantages of Department Of Education Student Loan Consolidation
- Reduce your monthly payment
- Lock in a lower rate for the life of the loan
- Improve your credit rating
- Ability to match your repayment plan and term to your financial situation
- It’s easy, no fees, no credit checks
An additional benefit is that you will pay a fixed rate that will permit you to make a long term plan for your future cash flow. And, in case you want to make a pre-payment, you won’t have to pay any penalties. This makes sense since the intention of a student loan is to help students, not to make money off them (at least not too much money from them).
But, you should keep in mind that although Department of Education student loan consolidation can simplify loan repayment and lower your monthly payment, it sometime also can significantly increase the total cost of repaying student loan. Consolidation offers lower monthly payments by giving borrowers up to 30 years to repay their loans.
So, you'll make more payments and pay more in interest. In fact, in some situations consolidation can double your total interest expense. If you don't need monthly payment relief, you should compare the cost of repaying your unconsolidated loans against the cost of repaying a consolidation loan.
You also should take into account the impact of losing any borrower benefits offered under non-consolidated repayment plans. Borrower benefits, which may include interest rate discounts, principal rebates, or some loan cancellation benefit can significantly reduce the cost of repaying your loans.
Disadvantages of Department Of Education Student Loan Consolidation
There are some disadvantages to getting student consolidation loan through Department of Education. You may be able to bankrupt your student loan seven years after the first payment became due. A loan consolidation may start the seven-year time period running again.
Moreover, if you are considering challenging the loan, a consolidation loan may waive some defenses if you later contest the loan in court. If you believe you may be going to court to fight against a loan, or are considering bankruptcy, you should consult a lawyer before applying for consolidation.
Another disadvantage of consolidation is that while you cure the default by consolidating a loan, your credit continues to show that at one point you were in default. If you "rehabilitate" a loan instead, any reference to the default is removed. Also after consolidation collection fees become part of the loan principle.
Finally, borrowers may have more opportunity to compromise the amount owed on old loans than on a consolidation loan. To compromise the amount owed means you negotiate repayment of lower amount than the total owed. However, this usually requires a lump sum payment of a major portion of the loan. Most low income people cannot afford the lump sum payment.
Choosing to Consolidate Student Loan at Department of Education
Department Of Education Student Loan Consolidation can significantly reduce your monthly payment burden. That's because Department Of Education Student Loan Consolidation student loan consolidation allows you to stretch your repayment period from the standard 10 years to up to 30 years, depending on the amount of your education debts.
The lower payment means you'll have more money available to meet other household expenses, including car payments, childcare, and career-related necessities.
The opportunity of enjoying Department of Education student loan consolidation, a well-designed repayment option, is available. Do not waste it.