How To Find Federal Programs for Student Loan Consolidation

Student loan consolidation is a great boon to anyone pursuing quality education, especially with today's high tuition rates. The convenience of combining all your student loans into one manageable package makes things a lot simpler, and it'll be much easier to focus on your studies. The United States government provides two federal programs for student loan consolidation: The Federal Family Education Loan Program and the Federal Direct Student Loan Program. Established in 1986, the federal student loan consolidation programs were created to ease the burden of paying the price of education. The federal programs for student loan consolidation address Plus loans, Perkins loans, and Stafford loans. These programs allow students and their families to consolidate all their current loans into a single education loan handled by the federal government.

The federal programs originally had variable interest rates, like many private loan consolidation services do. Federal Student loan consolidation programs' interest rates were determined by the university or whoever was the original lender. However, due to the actions of Congress in 1998, they now offer fixed interest rates for the entire life cycle of your education loan, so you can better budget your money in terms of school expenses. This can also be a great help when you start considering student loan refinance.

When 2005 rolled on in, the Government Accountability Office (GAO) took a look at the savings generated by school loan consolidation programs. Based on projected future variability in loan volume, interest rates, and other cost estimates supplied by the Department of Education, the GAO determined that consolidating every student loan would cost the government an extra $46 million. This cost, however, could be offset by merely avoiding costs in subsidies.

The fixed interest rates of federal Student loan consolidation programs are derived from the weighted average of other school and college consolidated loan interest rates. Relative weights are assigned to amounts that students borrow rounded up to the closest 0.125%. The rates are then capped at 8.25% interest and averaged.

A drawback to the federal programs is that the benefits of regular school loan consolidation programs are not carried over to federal consolidated student loans. Things such as special forgiveness situations and grace periods after graduation aren't included in the consolidation, and so you may want to consider this fact before availing of federal Student loan consolidation.

Compared to federal student loans, the terms for federal Student loan consolidation are significantly longer, lasting anywhere from 10 to 30 years. While your monthly repayments will indeed be lower this way, the overall cost throughout your education loan's life cycle will be higher than regular federal student loans. The interest will add up over the years, and while Student loan consolidation is an easier investment to manage, it is also less cost-effective. You've got to consider both your current budget and your future finances before deciding whether or not you'd like to spend a little extra for the convenience of federal Student loan consolidation.