Federal Student Consolidation Loans: The Best Route to Clearing College Debt

Students do not have things easier that the rest of us, as many would like to claim. They may not have a job to get up for, a demanding boss, a mortgage to pay and a family to upkeep, but they do have mounting debts and a small income that simply cannot keep up. Little wonder then that federal student consolidation loans are so welcome.The simple fact is that, in order to pay for the college education, students have to take out numerous college loans. Having so many individual loans makes clearing college debt a real headache, and can be a real struggle. This is where a consolidation program is of most use, reducing the headache by buying out all of the federal student loans in one go.Consolidating Federal DebtJust like any other loan, a federal loan needs to be repaid and as such can place pressure on the borrower. For students, the fact that three or four such loans can be taken out over the course of being in college, means that the pressure can become quite high. For this reason, federal student consolidation loans are necessary.There is a difference between private and federal loans, with the terms in particular making the federal option much more affordable. Usually, because it is the federal government that is supporting the financial package, the interest rate is lower than a loan supported by an independent private lender, like a bank. So, there are differing terms to the consolidation program if clearing college debt is really going to be advantageous.Buying out federal student loans and private student loans with one consolidation loan makes it hard to address the different issues of loan planning and budgeting. Keeping them separate in distinctive consolidation programs makes sense.Consolidation Loan OptionsWhen it comes to dealing with several federal college loans at the same time, there is a choice of government sponsored federal student consolidation loans available. Which one is the right one is dependent on specific loan terms and the situation that the student is in. But there are basically two programs under the Higher Education Act (HEA) to consider.The first is program that can be used in constructively clearing college debt is the Direct Consolidation Loan Program. In this program, the Department of Education issues consolidation loans to students, allowing them to pay off their existing loans. The terms of the new loans include a longer loan period, thus ensuring that repayments are much less each month.The second option is the Federal Family Education Loan (FFEL) program. In this program, the student can also get a loan from the Department of Education, but it is not restricted to repaying federal student loans. It can also be used to clear loans taken out to cover living expenses while in college.However, there are four other programs to choose from, each offering different advantages depending on the student situation. Speaking to someone in the financial aid office can help to identify the best one to choose. These four federal student consolidation loan programs are: the ICR or income contingent repayment plan; the extended payment plan; graduated payment plan; and the standard plan.Flexibility of Consolidation ProgramsThe challenge to clearing college debt is to do so at a rate that is affordable and manageable. For that reason, the consolidation programs that are provided include flexibility as a key element. The lifetime of these loans are longer, so that the principal is divided over greater number of installments.Coupled with lower interest rates, and numerous federal student loans reduced to one monthly repayment, it means the repayment can be as much as 50% of the original monthly amount.

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