A Direct Consolidation Loan allows you to combine multiple federal education loans into one loan. Before making the decision to consolidate your loans, you’ll want to carefully consider whether loan consolidation is the best option for you. Keep in mind, once your loans are combined into a Direct Consolidation Loan, they cannot be removed. Show
Advantages of Consolidating Your Student Loans
Some benefits such as the Pay As You Earn Repayment Plan and Public Service Loan Forgiveness Program are only available for Direct Loans. If you choose to consolidate your Federal Family Education Loan Program loans into a Direct Consolidation Loan, you may be able to take advantage of these programs. Disadvantages of Consolidating Your Student Loans
In weighing your options, be sure to compare your current monthly payments to what your monthly payments would be if you consolidated your loans. If you’re just interested in temporarily lowering your monthly payment, consolidation might not be the answer. Contact your loan servicer to consider alternative options such as switching repayment plans or requesting a deferment or forbearance. What are Direct Loans?Direct Loans are student loans provided by the Department of Education. Since July 2010, almost all federal student loans are made under this program—in full, called the William D. Ford Federal Direct Loan Program. Though the Direct Loan Program existed long before 2010, there was another bigger federal student loan program that most students relied on to finance their education: the Federal Family Education Loan (FFEL) Program. Under the FFEL Program, loans were made by banks and ultimately guaranteed by the taxpayer in case you didn’t make your payments. In 2010, this program ended. Loans from both of these programs are federal student loans. The main way the programs differ is in who made you the loan in the first place. Most of the benefits in the Direct Loan Program are available in the FFEL Program. However, FFEL Program loans are not eligible for Public Service Loan Forgiveness or the best income-driven repayment plans. This is where loan consolidation can help. It will effectively convert your FFEL Program loans into Direct Loans. How do I find out which type(s) of federal student loans I have?
What should I consider before consolidating?First, evaluate whether you want any of the benefits that are available only in the Direct Loan Program. Consolidating your loans can increase the amount of interest that accrues on your loans, so if you’re not interested in these programs, you may not want to consolidate. Also, understand that, by consolidating your loans, you will start your forgiveness clock over. For example, if you were already on an income-driven repayment plan and consolidate your loans, then you will lose the any credit you had already earned toward forgiveness. Lastly, understand that some of the loans that we called out for consolidation are those from another federal student loan program called the Federal Perkins Loan Program. Those loans have their own cancellation benefits that are based on your job. If you consolidate these types of loans, you will lose access to those cancellation benefits. Learn more about Perkins Loan cancellation. Resources
Source: http://blog.ed.gov/ Can you consolidate a FFEL loan into a Direct Loan?FFEL and Perkins loans may be "converted" to a Direct Loan (which is forgivable under the above programs) by requesting a Direct Consolidation Loan to "pay off" FFEL and Perkins Loans.
Will FFEL consolidation loans be forgiven?Borrowers who consolidated their loans had to start from scratch with their repayment timeline. Even if borrowers had been making payments on FFEL loans for 10 years, they would have to make another 10 years of payments to be eligible for Public Service Loan Forgiveness after consolidating.
How long does it take to consolidate FFEL loans to direct loans?The entire process typically takes between four and six weeks from the date your application is received. Before completing a consolidation application, carefully consider the following information to determine whether loan consolidation is the best option for you.
What are some disadvantages of getting a Direct consolidation loan?Consolidating could erase payments toward loan forgiveness. Your loan can be forgiven after making payments for 20 to 25 years under an income-driven repayment plan. ... . Consolidating to a longer loan term can be costly. ... . Consolidating could increase your interest rate. ... . Unpaid interest gets added to your balance.. |