Thursday, December 11, 2008

Which Federal Loans Can be Consolidated?

Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan. You can consolidate a consolidation loan including federal loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single federal consolidation loan by itself. These restrictions have been in effect since early 2006. Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations. The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation.

Who Can Get Federal Consolidation Loan and Student Consolidation Loan

Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.) Married students are no longer able to consolidate their loans together. Federal Consolidation Loan and Student Consolidation Loan This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005. In federal consolidation loan and student consolidation loan, Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. Federal Consolidation Loan and Student Consolidation Loan (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.) Parents, however, can consolidate PLUS loans at any tim

When To Apply Federal Consolidation Loan

To apply for a Federal Consolidation Loan, your loans must be in a grace period or in repayment. Grace period: Some student loans include a grace period of six or nine months before you are required to begin repaying them. This grace period begins the day after you stop attending school at least half time. For some loan types, the government pays the interest on your behalf during the grace period. If you consolidate while in your grace period, you could be waiving (giving up) part of that grace period. This waiver is permanent, and you can't reverse it. Note: If you have variable interest rate loans, in some cases you may be able to obtain a slightly lower interest rate on your consolidation loan if you apply for the consolidation during your grace period. Be sure to check with your lender to see if you would qualify for this benefit. You can also consolidate if your loans are in a deferment or a defaulted status, but some rules may apply. Deferment: A deferment is a period of time during which your loan holder temporarily suspends your regular payments. If the loans you are consolidating are in an authorized deferment period, the deferment will end the day the consolidation is complete. If you are still unable to make payments at that time, you will need to reapply for the deferment after you consolidate. In some cases, you might not be eligible for the same type of deferments as you were before the consolidation. Default: If the loans you want to consolidate are in default, you must make special arrangements so those loans are eligible to be consolidated: Establish a satisfactory repayment arrangement with the loan holder. Your consolidating lender will set the number of consecutive, voluntary, on-time, reasonable-and-affordable, monthly payments you'll be required to make before you can consolidate. (A lump sum payment, tax offset, wage garnishment, or court-ordered payment will not count towards the consecutive monthly payments.)

How To Apply Federal Consolidation Loan

Applying for a Federal Consolidation Loan is a multi-step process that might take four to six weeks to complete. Until the process is complete, you must continue making payments on the loans you wish to consolidate. Generally, the loan application process works as follows: You complete a Federal Consolidation Loan Application and Promissory Note and submit it to the consolidating lender. The consolidating lender sends a Lender Verification Certificate (LVC) to your loan holder(s) as listed in your application. The loan holder completes the form and returns it to the consolidating lender. Once the consolidating lender has all of your LVCs, they will send you a repayment option letter. This letter includes the estimated principal balance, interest rate, and repayment period of your Consolidation Loan. NOTE: You can cancel all or a portion of your Consolidation Loan at this time. Your consolidating lender will send payoff funds to your current student loan holder(s). You will receive a repayment schedule and disclosure statement. This document contains important information such as the consolidating balance and summary of your repayment terms, including your first payment due date. Shortly thereafter, you should receive a monthly billing statement for the Consolidation Loan. You have 180 days once the consolidation is completed to add any eligible loans you may have missed into the consolidation loan. This might change your repayment term and interest rate.

What is Federal Consolidation Loan

The Federal Consolidation Loan is designed to assist you with managing your student loan debt. It allows you to combine multiple student loans together, thus having one loan payment and loan holder. Your consolidating lender merges your existing loans into a new single loan called a Federal Consolidation Loan.