Applying for a Federal Consolidation Loan

A federal consolidation loan is a loan that allows a student to transfer multiple student loans into one comprehensive loan. The consolidating lender pays off the student's original student loans and then the student pays the consolidating lender, with interest, on a monthly basis.

Who is Eligible to Apply for a Federal Consolidation Loan?

In order to apply for a federal consolidation loan, you cannot be a full time student. You must have at least one loan that you are not currently repaying. You can consolidate any federal education loan.

When is Applying for a Federal Consolidation Loan Advantageous?

It is advantageous to apply for a federal consolidation loan if you have multiple student loans from various lenders. If your cash flow requires lower monthly payments and you can maintain payments over a longer period of time, consolidation may be a good move. Since the interest rate on a federal consolidation loan is fixed and therefore dependable, it is therefore smart to consolidate if you have variable interest rate loans. Because federal consolidation loans are paid over longer periods of time, they protect you from rising interest rates for years. If you would like to reevaluate your repayment plan, consolidation allows you to do so.

When is Applying for a Federal Consolidation Loan Disadvantageous?

It is disadvantageous to apply for a federal consolidation loan if you do not foresee being able to pay monthly rates decades into the future. Also, if you have some loans with very high interest rates and others with very low interest rates, consolidating may lead to a higher average interest rate. If your current lenders offer incredible incentives and superior loan benefits, consolidating may not be worth your money.

How do you Apply for a Federal Consolidation Loan?

Applying for a consolidation loan requires no credit check and no application or processing fee. Research and select a lender based on incentives. Fill out the federal consolidation loan application and mail it to your lender. Make sure to continue paying your loans until you are contacted by your consolidating lender. The application process may take anywhere from four to six weeks.

Tips When Shopping for a Federal Consolidation Loan

Look for benefits that you cannot lose. An example of a benefit that you can lose is the ability to lower your interest rate with on-time payments. If you are late for one payment, you permanently lose the ability to lower your interest rate. Lenders that offer discounts in principals or rebates on loan fees are advantageous.


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