A government debt consolidation loan can help you consolidate your debts and alternate your repayment plans to make it more affordable and thus can increase your chances to pay back all your debts on time.
There are consolidation loans provided by various government programs that enable you to make one monthly payment than making payments to 3 or more creditors. These loans work like other private consolidation loan programs. If you have to pay off multiple loans and are looking for a new loan to consolidate your debt then look no further…
Student Loan Consolidation and Repayment Plans
Student loan consolidation program is the readily available consolidation loan programs from the government. The federal government provides many loan programs to aid students or parents in debt as they often owe more than one federal educational loan. The Direct Loan (DL) Program and the Federal Family Education Loan (FFEL) Program are two programs that fall under the Higher Education Act (HEA); both allow loan consolidation to pay off multiple federal student loans.
As a part of the Direct Consolidation Loan Program, the old federal education loans are paid by the Department of Education and after that it issues a consolidated loan. The FFEL is another program where the funds come from private lenders that are subsidized and supported by the Department of Education. You repay the FFEL consolidation loan to the private lender that made the loan if you consolidate with the program.
In addition to the standard ten-year repayment, government debt consolidation loan programs offer four repayment plans: standard plan, extended payment plan, graduated payment plan (DL only) and income contingent repayment plan (FFEL only). Each plan has different features that offer flexibility for borrowers. However, you usually can stick to the standard 10 year repayment plan.
Advantages of Government Debt Consolidation Loans
A government consolidation loan can benefit you in some ways. By consolidating your loans you can alternate repayment plans to make it more affordable and thus can increase your chances to pay back all your debts on time. Another plus point of a consolidation loan is that you can simplify your money management by paying only one fixed payment every month.
Even though the new interest rate on a consolidation loan is almost the same as the interest rates on the old loans you can still lower the cost of the loan by shopping around for a better discount on the loan interest rates and better rebates on the fees.
So, if you are students or parents with many federal education loans you can really benefit from government debt consolidation loans as you can use it to consolidate all your federal student loans. Be aware, however, there are few problems on consolidation — for instance, loss of the grace period or the high cost of extended repayment — that you should take into account when considering a government consolidation loan.