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The Federal Loan Consolidation Program has helped countless Americans lower their monthly debt obligations. A loan consolidation can lower the overall debt burden and provide you with a much affordable repayment plan. If you are looking to consolidate your federal student loans, there are a few things that you must know and do before applying. Following is a summary of the steps you will need to follow.
First, you will need to determine which of the many federal loans you possess is being consolidated. Once you have determined which loans you are willing to consolidate, simply contact your lender and inquire about loan consolidation program application approval. Usually, all federal loans must be included in this program. The Federal Loan Consolidation Program has been established in 1986. In 1998, the United States Congress revamped the federal loan consolidation process, making the interest rate for new applications at this consolidated rate effective April 1, 1999. If you currently have an adjustable rate loan and wish to switch to a fixed rate loan, you will need to reapply after this change.
The next step involves deciding whether or not to go with a fixed interest rate versus an adjustable interest rate. Many people opt to consolidate federal loans with the fixed interest rate, since they are able to pay down their principal much faster. Additionally, you will receive a one-time payment, which is generally lower than the combined monthly payments of all previous loans.
When you apply for consolidation assistance, you will need to decide which of the numerous loans you possess will need to be consolidated. Usually, the first loan that is considered will be the primary loan, which is also the most current. Subsequent loans that are eligible for the consolidation program will be applied to the primary loan. There are several benefits to choosing to consolidate all of your student loans. First, by consolidating all of your payments into a single monthly payment, you are effectively reducing your monthly outgoings.
Furthermore, by using a direct loan consolidation program, you can save money by avoiding paying interest fees on multiple accounts. This is a significant benefit when compared to the alternative of paying high interest rates on multiple accounts. The majority of students will qualify for a student loan consolidation program, making it an ideal way to consolidate your multiple student loans.
Before you apply for a refinance, it is wise to know the exact cost of the new terms. In some cases, a refinance may actually cost you more money than you originally took out in student loans. Therefore, it is important to make sure that you are comparing apples-to-apples before you consolidate student loans. Also, if you have any existing conditions, such as poor credit or other financial difficulties, you should consider refinancing before you consolidate.