Government Debt Consolidation Loans – Update

Jeslyn Jessy asked:


How far do you understand about federal government student loan consolidation program? This program is offered by the US Department of Education. Unlike other forms of student loans, this type of loan consolidation is a loan issued for fresh graduates after the completion of their tertiary education. It is a great tool that allows the college or university graduates to merge all their federal loans into one new loan. It is used as a mean of extending the repayment term due to economic hardship.

To be frank, this program is in fact more costly for graduates in the long run if we look at the total repayment amount. However, it helps them to save some money at the initial stage by reducing the monthly repayment amount. In general, the monthly payment can be reduced up to 50-60%. This lower repayment plan is important for students who are unable to meet significant financial obligation right after their graduation.

Under this plan, the US Department of Education would be the sole lender and the students only need to make one payment every month. If they are currently unemployed, they will not be rejected to sign up for this plan. However, they are allowed to suspend their payment for up to 36 months (depending on their total debt amount). Moreover, if the graduates manage to pursue their career in public sector, they will be enjoying extra privilege where their monthly repayment will be adjusted based on both their annual income and the size of their family. In addition, if they plan to further their studies, they are allowed to defer their payment to a later date.

Student loans can be overwhelming and frustrating but nowadays, they don’t have to be because the federal government is putting a lot of effort to assist the graduates to overcome their financial issues.



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Ricky Lim asked:


Nowadays, the cost of higher education is getting more and more expensive. Some families may not be able to afford to send their son or daughter for further education. Getting a student loan will help.

There are 2 broad categories of student loans available. Government student loans and private student loans

Government or federal student loans are funded and administered by the US Department Of Education. It is classified under Federal Student Loans Aid Program. They have very few requirements other than you are studying in a US college or university. International students may also apply though approval is on a case by case basis.

Every year, the student loan aid program disburse nearly 60 billion dollars so it is a good choice for get a student loan from the government. Thus the interest rates are pretty low.

Private student loans are funded and administered by banks and other financial institutions. These lenders provide student loans at a higher interest rate compared to federal student loans. Some common student loans available are from Citibank and Sallie Mae

You are allowed to apply for both private and federal student loans for your education needs although I would not recommend it.

For some students who have a few student loans to repay concurrently, it can be a financial drain on their family finances. That is where student loan consolidation comes in.

Student loan consolidation basically consolidates all your student loans into one loan so that it is easier to manage and make payments. When you are getting a student loan consolidation whether from the government or the private market, your existing student loans are paid for and erased by the student loan consolidation lender. The balances are transferred to the new student loan consolidation. Thus you start a new loan and only needs to make a single payment each month.

There are many advantages to using student loan consolidation. The interest rates will be lower since it takes the average interest rates of your previous student loans. Thus due to government legislation, the maximum interest rate cannot be higher than 8.25 percent.

It becomes a lot easier to manage a single student loan and payment are easier. The repayment options are quite flexible. For federal student loan consolidation, you can opt to start repaying after you have graduated from school. There are also several other options.

Another beneficial side-effect of student loan consolidation is that it can also improves your credit score. Since you are effectively clearing all your old student loans and taking a new one, your credit score will increase and is important if plan to take other types of loans in the future.



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