Direct Loan Consolidation Overview

November 17, 2011

Direct Loan Consolidation

Direct Loan Consolidation

Direct loan consolidation is a free service offered by the US Department of Education as a way to group all of your student loan debt into one single payment, and doesn’t require one to go through a credit check for acceptance. Consolidation of student direct loans can consist of loans programs that include; Federal Perkins Loans, Direct PLUS Loans as well as Federal Stafford Loans among near all other federal programs that offer financial aid. Direct loan consolidation was formed to both provide savings right away as well as long term, as well as provide stress relief by allowing one to only have to pay one payment instead of multiple.

Major Benefits of Direct Loan Consolidation

If you are looking to use direct loan consolidation for your student loan debt, it should be known that you should either be in the grace period provided by your lenders, or anytime after that during your repayment, as you cannot consolidate your direct loans if you are still in school. If you choose to consolidate your loans during the time of your grace period, then your grace period ends no matter how much time you have left on it, which it is suggested that you wait until your grace period is finished and then apply for consolidation. Some of the major benefits that come from using direct loans consolidation are:

  • One can enjoy a longer repayment period, which can be stretched out to up to 12 to 25 years, compared to the normal 10 year timeframe that is given for direct loans. Payments will be lower with this option, which means more interest is going to be paid in the long run, but there are no repayment penalties, meaning you can pay more than the minimum anytime you choose. Extended the repayment period has been shown to lower monthly payments by up to 53 percent.
  • Your credit score will actually go up by using direct loan consolidation as your loans will be registered as paid off as soon as you consolidate, which is view as a positive aspect by credit bureaus.
  • You will be paying on a fixed interest rate, meaning the the interest percentage that you are paying when you first start, will be the same amount until you last payment.
  • There is a possibility that the act of consolidation can actually provide a lower interest rate than that of what you are currently paying to lenders.
  • It offers flexible repayment options.
  • One can consolidate defaulted loans if in the event that they either; pay their debt off by using “income contingent repayment” or make “satisfactory repayment arrangements” through their current lender.
  • Health profession loans can consolidated as well, like for Nursing Student Loans or Health Education Assistance Loans among others.
  • You can also consolidate other existing loans that have been consolidated.
  • Multiple repayment options which include; standard repayment, graduated repayment, extended repayment, income contingent repayment and income based repayment, which you are able to switch repayment plans anytime during the life of your repayment term.
  • You can receive 0.25 percent off of your interest rate if you use their “Electronic Debt Account” which your payments will be deducted one time per month.
The entire process will usually take around 60 to 90 days to get started with consolidation, in which after the beginning of the process, one will have up to 180 days to add other loans in which they either forgot to include or left on purposely. If one chooses to use direct loan consolidation for other loans not consolidated the first time around, then they must apply for a new consolidation loan. It is also not applicable for married couples that are trying to do joint filing. The last thing your should keep in mind is that if you do choose to use direct loan consolidation while you are repaying loans, keep repaying your lenders until your lenders have contacted you informing you that the loans have been paid off.
Category: Student Loan Consolidation, Student Loan Database

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