Federal student loan consolidation can be a great option for many people. You can generally still keep all the wonderful benefits of the federal loan programs, and possibly lower your payments or extend the deferment time. Here are a few tips that should help you during the process.
It’s important to keep your private loans and federal loans separate. While the idea of having one loan payment may be tempting, if you combine these loan types you will lose many of the key benefits associated with the federal student loans. Federal student loans generally have a more lenient deferment option, the interest is tax deductible, and many can be forgiven if you work in certain fields. If you consolidate your loans together you will lose these benefits. Your best option is to consolidate all your federal student loans first, then your private student loans after.
An FFEL consolidation loan is great since it allows you to consolidate different types of federal loans in to one payment. The consolidation will be done through a commercial lender. This will also help your credit rating since the credit bureaus are notified of a zero balance on the previous loans. As long as you are in a repayment plan, have paid on time for three consecutive months you are eligible to apply for this type of loan. The repayment period can be extended to as much as 30 years with a FFEL consolidation loan, which can also save you money on your monthly payments. Since your original federal loans are paid off under this program, you may be eligible for other federal loans through various programs as long as you are not in default on any other federal loan program.
One of the greatest things about a federal student loan consolidation is that you can turn several payments in to one. You are usually able to take advantage of many different repayment options when you consolidate as well. When you consolidate your student loans, the loan terms are reset. This means you may be eligible for further deferments, forbearances, and other benefits that can help out in a pinch. The monthly payments are generally lower as well.