Private versus Federal Consolidation Loans – What’s the Difference?
A consolidation loan lets you combine your federal student loans into a single loan with one monthly payment. There are two programs available for consolidating student loans:
-The Federal Family Education Loan (FFEL) Program, through which banks, secondary markets, credit unions, and other lenders provide the consolidation loan
-The William D. Ford Federal Direct Loan (Direct Loan) Program, through which the federal government provides the consolidation loan
There are several differences between these programs, as outlined in the table below:
FFEL Program
Lenders - Banks, secondary markets, and credit unions
Loans accepted - Can accept all eligible loans from eligible borrowers, but are not required.
Repayment Plans- Offers four repayment plans
- Standard Repayment Plan
- Graduated Repayment Plan
- Extended Repayment Plan
- Income - Sensitive
Repayment Plan (in which the monthly payment amount is set according to the borrower's income and loan debt)
Timing of consolidation
Borrowers can consolidate after they have left school and all of their loans are in grace or repayment.
Direct Loan Program
Lenders - Federal government
Loans accepted - Must accept all eligible loans from eligible borrowers
Repayment Plans - Offers four repayment plans
-Standard Repayment Plan
-Graduated Repayment Plan
-Extended Repayment Plan
-Income - COntingent Repayment Plan (in which the monthly payment amount is set according to the borrower's income, family size, and loan debt)
Timing of consolidation
Borrowers can consolidate while they are still in school.
In other ways, the two loan programs are similar:
-They both have options to allow borrowers who have defaulted on their loans to consolidate those loans.
-In general, neither of them charges prepayment penalties or origination fees, nor are credit checks or co-signers required. However, some private lenders may charge processing fees.
-The base interest rate on your consolidation loan is the same regardless of the lender. However, private lenders may offer additional incentives such as a reduced rate if you make your payment on time and if you have your payment automatically debited from your bank account.
Keep in mind that if all of your loans are through one lender, that lender has the first option to consolidate the loans. Only if that lender declines can you go elsewhere.
This article is distributed by NextStudent. At NextStudent, we believe that getting an education is the best investment you can make, and we're dedicated to helping you pursue your education dreams by making college funding as easy as possible. We invite you to learn more about Private Consolidation Loans or Federal Consolidation Loans at http://www.NextStudent.com .
How to Search for Scholarships
Finding scholarships for college or a major university is a lot like picking an actual college. It is not an easy process or something that just happens overnight, but rather, it takes hard work, dedication, and a lot of research to find the scholarship opportunities that are best for you. On the one hand, you are putting a lot of time, work, and effort into finding a scholarship. But just think about the thousands of dollars that you can save by obtaining a scholarship for college.
Parent Loans
If you are entering college soon, but have no idea how you are going to pay for anything from books to your actual tuition fees, chances are that you are going to be relying upon your parents in some way, shape, or form. For most first-time college undergraduates, college or university tuition is either paid through grants, because parents’ financial information allows the use of grants, scholarships, because of academic or athletic prowess, or loans, because students can not pay for college or a university outright.
No-Cost Student Loan Consolidation
A no-cost student loan consolidation – doesn’t that just sound too good to be true? Think about it. You have just accrued thousands of dollars in debt through student loans after 4 years of college, or possibly even more. Then, a company offers to take all of your loans off of your hands, put them into one central loan, and do it all for free! Well, while it might not be too good to be true, it all depends around your particular situation, which could make this a “free” process, or could still work out to the benefit of the consolidation company that you are working with throughout the process.
