If you happened to take out student loans during your college years, odds are that you will end up with several individual loans. This could be confusing and overwhelming, specially if you’re dealing with different repayment dates, options, and all the interest you’re accruing.
Lucky for you, there is an option that simplifies this process, and it’s called Direct Consolidation Loan.
This option allows the borrower to consolidate his Federal student loans into one simple payment. However, there are a few things to consider before applying for this option.
The Direct Consolidation Loan was designed to combine all of a borrower’s Federal student loans into one.
Eligible loans include, but are not limited to, Direct Subsidized and Unsubsidized Loans, Federal Stafford Loans, PLUS Loans, Perkins Loans, Federal Nursing Loans, and existing consolidation loans.
Private student loans cannot be combined with Federal loans in a Direct Consolidation Loan.
Most borrowers are eligible for consolidation as soon as they graduate, leave school, or when their enrollment drops below half-time. And, the application process can be started by contacting one of our expert student loan geeks today! Call toll-free 844-345-4335. Our friendly and knowledgeable geeks will gladly assist you throughout the entire process.
There are some good reasons to consolidate:
Perhaps the best reason to consolidate your student loans is that it makes your life a whole lot easier. Instead of several different payment amounts and interest rates to worry about, a Direct Consolidation Loan combines all of your loans into one bill.
And, you can actually lower your monthly payment amount.. On the negative side, depending on your total loan balance, consolidating can increase your repayment term from the standard 10 years to as long as 30 years. On $50,000 worth of student loans at 6% interest, this can mean the difference between monthly payments of $555 and $300.
If any of your loans are on variable interest rates, consolidation gives you the chance to switch to a fixed rate. This can be a huge benefit, especially now, when interest rates are still near historical lows. All Direct Consolidation Loans have fixed rates based on the weighted average of the interest rates of all of the loans being consolidated.
However, make sure you know what you’re agreeing to…
There are some potentially negative aspects of consolidating. For example, while a longer repayment term can definitely lower your payments, it can also mean you’ll pay thousands more in interest over the life of the loan.
Consolidating your loans also opens the door to other benefits, such as being able to qualify for income-sensitive repayment plans like Public Service Loan Forgiveness and Teacher Loan Forgiveness.
Direct Consolidation Loans are eligible for these repayment plans, such as Income-Based Repayment (IBR) and Pay-As-You-Earn, and are eligible for any benefits specific to those repayment plans.
Direct Consolidation it’s permanent, so be 100% sure before you agree!
Before you make a decision, I should definitely stress that a Direct Consolidation Loan is not reversible. Just like when you refinance a mortgage, the original loans are paid off and don’t exist any longer.
Consolidating your Federal student loans definitely has its advantages, especially if you have a bunch of individual loans, or if any of your student debt has a variable interest rate. Just make sure consolidating won’t do you more harm than good before you agree to it.