Loan consolidation government
loan consolidation is a term used for the consolidation of all the existing loans into one. Main purpose behind loan consolidation is to lower the overall monthly payments and becoming debt free over a period of time. In United States, many people are suffering from different types of debts and are finding loan consolidation a great tool for becoming debt free and for improving credit score. Student loans are no exception and many people are going for student loan consolidation for becoming debt free.
There are federal student loans as well as private student loans available from different types of lenders and consolidation of these loans is done separately. government loan consolidation is a term used for the consolidation of federal student loans so that borrower is able to make monthly payments in an easy manner and eventually becomes debt free. government loan consolidation in United States is characterized by fixed and lower interest rate. Student loans are generally unsecured loans and all types of federal student loans are consolidated into one through government loan consolidation process. It is important to understand here that government loan consolidation is different from consolidation of other types of loans.
This is because federal student loans are guaranteed by the federal government. In government loan consolidation, all the existing federal student loans are purchased and closed by the Department of Education or by a loan consolidation company offering federal student loan consolidation services. Selection of these two depends upon the type of federal student loans obtained. As far as interest rate for the government loan consolidation is concerned, it is based upon the interest rate of the student loan in the current year. This rate is basically the 91-day Treasury Bill rate with respect to last auction in the month of May every year. These rates are different for different types of federal student loans. For example, for Stafford loans, this rate varies from 4.7% to 8.25%. Similarly, interest rates attached with Plus loans is 9%. It is important to note here that under the current consolidation program, students can consolidate once with a private lender and if reconsolidation needed, Department of Education is the only choice available.
As said above also, government loan consolidation is done at fixed interest rate that is based upon the current interest rates. There is no change in interest rate if a person goes for reconsolidation of student loans. If student has obtained different types of student loans, rate attached with government loan consolidation is decided on the basis of weighted average calculation of the current interest rate of different types of student loans taken.
Many experts term government loan consolidation as refinancing. This, however, is not true as interest rates do not get changed and rather, these are locked in. Unlike private student loan consolidation which is also very popular in United States, there are no fees attached with government loan consolidation and if it is carried by private institutions, they get subsidies from the federal government rather than charging fee from the applicant. A person should take care while going for government loan consolidation that not all the consolidating agencies report to the credit bureaus and thus, he should contact only those institutions that report to credit bureaus. This would help him in becoming debt free as well as in improving the credit scores.
Getting government loan consolidation
There are many types of federal student loans that can be consolidated through government loan consolidation. For example, Plus loans, Stafford loans, Heal loans, NSL loans, consolidation loans, HPSL loans, Perkins loans, and all types of Direct loans can be consolidated through government loan consolidation. A student must take care while getting Perkins loans consolidated. This is because while getting these loans consolidated, a person has to loose the subsidy as these are subsidized by the federal government in United States.
Finding a lender for government loan consolidation is not a difficult task. For example, a person can contact Graduate loan Associates. It is one of leading providers of government loan consolidation services and allows a student to retain many benefits like forbearance, deferment, tax deductibility, disability and death benefits etc. If a person wishes to go back to school or put them in deferment, subsidized and unsubsidized student loans remain split. If any student in his grace period wishes to go for government loan consolidation, he can easily lock low interest rate. For the Stafford loans, grace period rate is 0.6% lower than the repayment rate. It allows a student to make one lower rate monthly payment and loan term of government loan consolidation can be extended to 30 years depending upon the balance. There is no fee charged and no credit check made before providing services.
Average time taken for the process varies from 4 weeks to 10 weeks. Generally, a student is able to get loans consolidated from 6-8 weeks. consolidation services are offered only when a student in not in default. government loan consolidation services are offered for direct subsidized as well as unsubsidized loans, guaranteed student loans, federal insured student loans, subsidized and unsubsidized federal Stafford loans, Direct Plus and Plus loans, supplemental loans, NDSL, HEAL, HPSL, NSL, loans for disadvantaged students etc. However, some loan programs are ineligible. For example, primary care loans, medical assist loans, PLATO loans, private lender loans, law access loans and loans not guaranteed by federal government are not considered for government loan consolidation services. A person can easily call at 1-800-309-0825 for getting more information.
Student Aid Centers of American is another leading national organization that can be contacted for important resources and information regarding government loan consolidation services. Parents, students, graduates, schools etc can easily benefit from the services offered. Professional representatives and student loan counselors help a person in understanding all the related aspects and in finding best solutions. A student can easily log on to studentaidcenters.org for getting more information.
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