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National Education Loan Repayment Program Article
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Direct Consolidation Loans
from: Kyle BesserA federal Direct Consolidation Loan allows a borrower to consolidate (combine) multiple federal student loans into one loan to have a single monthly payment instead of multiple monthly payments. Before you consolidate education loans, you should carefully consider whether Department of Education student loan consolidation is the best option. Loan consolidation can simplify education loan repayment and lower your monthly payments, but education loan repayment also can significantly increase the total cost of education loan repayment.
Federal education loan consolidation offers lower monthly payments by giving you up to 30 years to repay your loans. If you increase the length of your education loan repayment period, you will also make more payments and pay more in interest over the course of the education loan repayment. In some situations, education loan consolidation can double the total interest you pay. If you don't need monthly payment relief, you should compare the cost of repaying the loans separately against the cost of repaying an education consolidation loan.
Before you consolidate education loans, you should also carefully consider the impact of losing any benefits offered under the education loan repayment plans for the original loans. Benefits from your original loans, which may include interest rate discounts, principal rebates, or some loan cancellation or education loan forgiveness benefits, can significantly reduce the cost of repaying your loans.
You may lose these interest rate discounts, principal rebates, or some loan cancellation or education loan forgiveness benefits if you consolidate education loans. Once your original loans are combined into a direct federal consolidation loan, a federal Direct Consolidation Loan, they cannot be removed. That's because the loans that were consolidated have been paid off and no longer exist. Take the time to study the pros and cons of direct federal consolidation loan before you submit your application for a US Department of Education loan consolidation.
Visit the Department of Education loan consolidation website for more information at www.loanconsolidation.ed.gov. On the website there is a Checklist Tool for Consolidation to help you figure out if a US Department of Education loan consolidation is for you. You can also contact the Direct Loan Origination Center Consolidation Department by calling 1-800-557-7392 TTY users may call 1-800-557-7395.
What is the interest rate on Direct Consolidation Loans?
A federal Direct Consolidation Loan has a fixed interest rate for the life of the Direct Consolidation Loan. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of 1% and cannot exceed 8.25%.
How to apply for a federal Direct Consolidation Loan?
There are several ways that you can apply for a federal Direct Consolidation Loan:
*Apply online at www.loanconsolidation.ed.gov.
*Download a paper copy of the application form and promissory note at www.loanconsolidation.ed.gov.
*You can apply over the phone if you have all Direct Loans by calling 1-800-557-7392.
*Request an application package be mailed to you by:
*Call 1-800-557-7392 (TDD 1-800-557-7395) or 334-206-7400 (outside the USA).
*E-mail consolidation@mail.eds.com.
When does repayment start?
Repayment of a federal Direct Consolidation Loan begins immediately upon disbursement of the loan. Your first payment will be due within 60 days. The payback term ranges from 10 to 30 years, depending on the amount of education debt being repaid and the repayment plan you select.
Federal Direct Consolidation Loans that include parent PLUS loans are not eligible for the Income-Based Repayment Plan. For additional details on repayment plans available for federal Direct Consolidation Loans, go to the Loan Consolidation web site or check with your loan servicer.
Repayment Plans
There are several repayment plans designed to meet the different needs of individual borrowers. You will receive more detailed information on your repayment options when you consolidate your loan. To learn more about repayment plans, go to the Repayment Information page on the Department of Education loan consolidation website for more information at www.loanconsolidation.ed.gov.
If you are having trouble making your payments, you can receive a deferment or forbearance under certain circumstances that allows you to temporarily stop or lower the payments on your federal Direct Consolidation Loan. For more information, go to the Repayment Information page on this web site.
Your federal Direct Consolidation Loan may be cancelled or discharged but only under a few circumstances. For more information on how a Direct Federal Consolidation Loan may be cancelled or discharged, go to the Cancellation/Discharge page on the Department of Education loan consolidation website for more information at www.loanconsolidation.ed.gov.
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