Federal Direct Student Loan Consolidation Restrictions: Who Qualifies

A federal direct student loan consolidation is available to most every borrower who takes out a student loan. The two federal loan programs that are available, Stafford loans and PLUS loans, provide students and parents with an opportunity to borrow funds necessary to meet college expenses. The amount that the student or their parents are allowed to borrow is based on financial need, subject to either income restrictions or credit rating.

Stafford Loans

A student can borrow a Stafford loan, subject to a borrowing limit that is based on their year in school. The interest rate is capped and the loan's repayment takes place 6 months after the student leaves school or graduates.

PLUS Loans

The PLUS loan program gives students and parents the opportunity to borrow whatever amount necessary to pay for college based on need and a good credit rating of the parent (or co-signer). The loan has a capped interest rate that is slightly higher than the interest rate on a Stafford loan. The loan repayment takes place with 60 days after the funds are paid to the college or university although under certain circumstances can be deferred to 6 months after graduation or when the student leaves school.

Qualifications for Federal Student Loan Consolidation

Consolidation, which takes place through the Student Loan Marketing Association or Sallie Mae, offers an opportunity for students or their parents to lower their payment and combine their loans to make repayment easier. The qualifications for federal student loan consolidation, regardless of the loan program (be it Stafford or PLUS or any of the other programs) are the same, as described below.

When a student or their parent seeks to take advantage of lower interest rates and consolidate their outstanding Stafford or PLUS loans, they must go through an institution that participates in Sallie Mae's loan consolidation program. Typically, Sallie Mae requires that the borrower who is seeking to consolidate their loans have a good credit rating. Sallie Mae may further require that the borrower be current on all of their outstanding students loan and not be in default.

This requirement ensures Sallie Mae and the lending institution that consolidates the loan that the borrower is responsible and able to continue their loan obligations. The ability of the borrower to pay is a key factor in qualifying for a consolidation of a student's federal education loans.

Any borrower (repeat any borrower) who meets the above qualifications can apply for a federal student loan consolidation. If a borrower is considering a federal direct student loan consolidation in order to lower their interest costs and bring their monthly payments down, they should contact their lending institution that provides federal student consolidation loans through Sallie Mae.

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