By Dale Ronewicz
A Consolidation Loan allows you to combine your federal studentloans into a single loan with one monthly payment, which can besignificantly lower than the payment required under the standard10-year repayment option. Under the Federal Family EducationLoan (FFEL) Program, banks, secondary markets, credit unions,and other lenders provide the Consolidation Loans. Under theWilliam D. Ford Federal Direct Loan (Direct Loan) Program, thefederal government provides the loans.
Most federal education loans are eligible for consolidation,including subsidized and unsubsidized Direct and FFEL StaffordLoans, SLS, Federal Perkins Loans, Federal Nursing Loans, andHealth Education Assistance Loans. Private education loans arenot eligible. PLUS Loan borrowers (parent borrowers) also canconsolidate their loans.
To apply for a Direct Loan Consolidation or an FFELConsolidation the borrower must contact the lender and completean application. Most lenders provide borrowers with the abilityto apply on-line or request an application over the telephone.Once an application is completed and submitted, the lender willrequest information from the borrower’s other lenders or fromits own system to determine the amounts outstanding on theborrowers loans. The borrower will then receive notificationabout the consolidation loan, normal consumer disclosures, theamount owed, and if appropriate, where to make payments.
Always Consider the Cost
You should keep in mind that although consolidation can simplifyloan repayment and lower your monthly payment, it also cansignificantly increase the total cost of repaying your loans.Consolidation offers lower monthly payments by giving borrowersup to 30 years to repay their loans. So, you'll make morepayments and pay more in interest. In fact, in some situationsconsolidation can double your total interest expense. If youdon't need monthly payment relief, you should compare the costof repaying your unconsolidated loans against the cost ofrepaying a consolidation loan. You also should take into accountthe impact of losing any borrower benefits offered undernon-consolidated repayment plans. Borrower benefits, which mayinclude interest rate discounts, principal rebates, or some loancancellation benefits can significantly reduce the cost ofrepaying your loans.
Article Source: www.ArticlesBase.com
