It is the move which is through the department of education. You need to fulfill some eligibility criteria to get the federal loan and their repayment programs. But the federal student loan consolidation will not help you to decrease the interest rates in order to save the money.
The government pays off your previous debt and replaces it with the new consolidation loan. For this to happen you get the eligibility when you become a graduate. Consolidation of the loan from the department of education is free, unlike the private consolidation which applies some charge fee.
Consolidating the federal loans, the new fixed rate will be depending on the total average of your previous rates and then it will be rounded up to the next half of 1%. Hence, if an average is 6.15% then after rounding up, it will be 6.25%.
In addition, you can get the new loan which can range from 10 to 30 years. The repayment process starts within the 60 days of consolidation of a loan. Moreover, it will be based on the federal student loan balance.
Step for consolidating the federal student loans
When you go for federal student loan consolidation, it mostly takes maximum 30 minutes, by the federal student aid website. You will be required to provide the details of your previous federal student loan and then select a federal loan servicer; this will make the repayment plan for the new consolidation loan.
Follow the steps to get the federal student loan
- You need to go to studentloans.gov and log in by inserting the federal student aid id. For the application you need to click on “Complete the consolidation loan application, and promissory note.”
- You can consolidate one or all the loans. You will get the option to select them.
- The federal loan servicers are various private companies that look after the student loan consolidation for the education department. You can select one of the four consolidation loans.
- You need to select repayment plan for your consolidation loan. Then on the monthly basis you will be making the payment for next 10 to 30 years. It depends on the total federal loan balance.
- Complete your application to submit it. Additionally, you need to fill the personal information and the names of two references. Sign to submit the application. You can then continue to make the payment on current federal loans until the application is processed.
Benefits of the consolidation of federal student loan
- In the direct loan programs, the federal loans are qualified for Pay as you earn and revised pay as you earn and public service loan forgiveness.
- Parent’s borrowers having the PLUS loan are required to consolidate, and then they become eligible to get income-contingent repayment.
- Consolidating the default federal student loan will retain your eligibility for the benefits like forbearance, loan forgiveness programs, and deferment.
- Federal student loan consolidation can ease your life, if you have more than one federal loan servicer. Rather than paying different federal student loan bill every month, you will be giving the payment to only one service.