Government debt consolidation loans are one good option for consolidating your student debts if you have to pay off multiple loans. These consolidation loans provided by various government programs enable you to make one monthly payment than making payments to 3 or more creditors. These loans work like private consolidation loans, however, unlike private consolidation you don’t have to pay fees to consolidate your loans.
A popular form of government-backed consolidation loan is federal student loan consolidation. The Higher Education Act (HEA) allows a loan consolidation program under both the Federal Family Education Loan (FFEL) Program as well as Federal Direct Loan (FDL) Program. With the help of a new consolidation loan from government you can consolidate Stafford loans, Plus loans, and Perkins loans into a new single loan.
Reasons to Get a Government Debt Consolidation Loan
By consolidating your federal educational loans, you can simplify your monthly payments by paying only one fixed payment every month. As the interest rate is fixed the loan can make financial planning easier and increase your chances to pay back all your debts on time. What’s more, you can choose a repayment plan that can help make your monthly payments more affordable.
Even though the rate of interest for government debt consolidation loan is the weighted average of the interest rates of old loans – there is almost no interest rate reduction – you still can switch lender that offer a better discount on loan interest rates and a better rebates on other fees.
If you’ve already exhausted the deferment and forbearance options on your existing loans debt consolidation can help reset them with a new set of deferments and forbearances. This is especially helpful if you are a medical student who is looking for an economic hardship deferment. A debt consolidation loan can help you get up to another three years of deferment.
Consolidate Student Loans with a Government Loan
You can get a FFEL consolidation loan to consolidate your educational loans during your grace period, once your loans have entered repayment, or during periods of deferment or forbearance. To qualify for a Direct Consolidation Loan, you need to have at least one FFEL or FDL that has been granted a deferment, default status or is presently in grace period.
Any lender can consolidate your federal student loans. Most lenders, however, can set a minimum balance — like $5,000 or $7,500 — on the loans. As the terms of consolidation loans are varies you will need to shop around for a lender that best suits your personal needs and offers lower rate or better discounts.
Now that you have had a brief look at government debt consolidation loans, why not consider one to consolidate your federal student loan debts? Many students and parents have successfully used the loans to consolidate their federal education loans. So, if you have multiple federal student loan debts you too can use the loan to get your expenses under control and your life back on track.