Federal Student Loan Consolidation – The Best Choice for Most

If you are considering Federal Student Loan Consolidation you are looking at a smart way to manage your student loan debt and a practical repayment program. While both federal and private loan consolidations have benefits, federal loan consolidation offers more advantages. However, when consolidating student loan debt, it is important to understand each program.

Federal student loans are not credit based, meaning you could have poor credit and still qualify in order to consolidate your student loans. Private student loans are based on your credit, often require a co-signer, and are not based on your needs. The most significant benefit to choosing a federal student loan for consolidation is the ability to combine all your federal loans into one loan, with one payment. Private loans do not allow for consolidation of federal loans, nor may a federal student consolidation loan include a combination of federal and private education loans.

Federal student loan consolidation is often the better choice for many reasons:
• No credit check
• You do not need to be employed
• No a co-signer necessary
• You do not need collateral
• You can retain all your previous federal loan privileges
• Interest paid on the loan is tax deductible

Another benefit making federal student loan consolidation the better choice for most student debt is a new payment option for federal student loans. Income-Based repayment (IBR) is a new payment schedule option which helps borrowers keep payments affordable, as payments caps are based on income and family size. This usually means IBR loans will be less than 10% of your income, even smaller if your earnings are substantially lower. A number of financial institutions offer these payment schedules with student loan consolidation. You can apply for federal student loan consolidation at banks, credit unions, and lending companies.

Another, often overlooked, reason that student loan consolidation is a great choice is the Public Service Loan Forgiveness Program. Under this program you may be allowed to have the balance of your loan forgiven if you are employed full-time in certain areas of public service and if you have made your payments on time for a qualifying period of time. The terms of this program are certainly worth looking into.

Unlike private loans, which can have fixed or variable interest rates, federal consolidated student loans are drawn on a fixed-rate refinancing program. Often you can also choose a repayment schedule, such as fixed, graduated or income based. All your existing federal loans will be combined into one loan, with one fixed interest rate. The result is usually one lower loan payment and one lower interest rate ~ a definite benefit!