Learn More About Your Federal Student Loans
Benefits to Consolidating your Federal Student Loans
Federal consolidations are available to borrowers who have federal loans and are no longer in school. These consolidations are done through The William D. Ford Federal Direct Lending Program. In 2010 there were some additional changes to the program options, instituted through the Health Care and Education Reconciliation Act (also known as ObamaCare). Generally speaking, federal loans have many more beneficial aspects to them versus their private loan counterparts. Therefore consolidation is, typically, a much more viable option than converting them into a private debt. Also when dealing with a federal student loan, it is much easier to qualify for, unlike private consolidations they:
What Type of Loans are Eligible?
Only federal student loans can be consolidated under this program.
Can I Consolidate My Student Loans if I am in Default?
Yes, as long as you do not have a wage garnishment against you. Consolidating your defaulted student loans and enrolling in an Income Based Repayment Plan can be a great way to get a “fresh start” and make your student loan situation much more manageable. Those that have a wage garnishment must first go through rehabilitation before being eligible to consolidate.
When Can Loans be Consolidated?
You are typically able to consolidate after you graduate, leave school or are below half time enrollment.
Will my interest rate change?
Federal consolidation does not lower your interest rate, it simply take a weighted average rate of the loans you already have. Because federal consolidation don't change your rate, if you are a highly credit worthy borrower, you may want to consider private consolidation/refinancing.
By consolidating, can I take advantage of Income Driven and Forgiveness Plans (If I qualify)?
Absolutely! This is often one of the best reasons to consolidate your federal student loans. Keep in mind though, you are not automatically enrolled into the income driven plans, you must choose this option when consolidating (or later on) to take advantage of these. Also keep in mind that not all federal loans are able to enroll in all income driven plans. For example, Parent Plus loans are only eligible for Income Contingent Repayment (they are not eligible for IBR programs).
How Long Does the Process Take?
The typical consolidation process takes approximately 45 to 60 days. This is largely tied to the prompt return of the necessary documents that are needed and required to be supplied by the client themselves.
Does My Fee Payments Apply to My Student Loan Balance?
No, the document preparation fees are assessed for the work done on the clients behalf to ready all documents needed for the consolidation process.
Will I Have to Pay my Student Loan Payments When Consolidating?
Typically the student loan servicers will grant an administrative forbearance on behalf of the client during the consolidator process. The main reason why this would be denied is that the client has excessively used deferring their student loan payments through forbearance in the past. Their is a limited number of payments that can be deferred through this means.
FAQ's Regarding consolidating your Federal Student Loans