Consolidation loans allow you to combine different types of federal student loans
to simplify repayment. Even if you have just one loan, you can also choose to consolidate
it. Both the FFEL and Direct Loan Programs offer consolidation loans. There are
several advantages to consolidate or rehabilitate your loan as described in the
categories below. FFEL Consolidation Loans
A FFEL Consolidation Loan is designed to help student and parent borrowers consolidate
several types of federal student loans with various repayment schedules into one
loan. With a FFEL Consolidation Loan, you will make only one payment a month. Under
this program, your consolidation loan will be made by a commercial lender, credit
bureaus will be notified that your account has a zero balance, and you will sign
a new promissory note that will establish a new interest rate and repayment schedule.
To receive a FFEL Consolidation Loan, you must be in repayment on your defaulted
loan (that is, three voluntary, on-time, full monthly payments). Depending on the
balance due, the repayment period may extend up to 30 years. If you owe no other
delinquent or defaulted debts to the United States, you will again be eligible for
other federal funds, including FHA loans, VA loans, and Title IV student financial
aid funds.
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