Federal Student Loan Consolidation In The United States
There are two major federal student loan consolidation programs in the United States that allow people to combine their federal student loan debts. These are the Federal Family Education Loan Program, and the Federal Direct Student Loan Program. People can use these programs to consolidate any type of federal student loan, including Stafford Loans, PLUS Loans, and Federal Perkins Loans. Having a single debt rather than several different accounts provides reduced monthly payments, longer repayment terms and fixed interest rates.
Federal student loan consolidation programs have more flexible options for repayment terms, as borrowers can choose terms of 10 to 30 years.
A longer repayment term will ensure lower federal student loan payments each month, but it will take longer to pay the debt off, and more interest will be assessed. The interest on a federal student loan consolidation is fixed, though, and is calculated as the weighted average of the interest rates of all the loans being consolidated. federal student loan interest rates are rounded up to the nearest 0.125 percent, and capped at 8.25 percent. Some other features of the federal student loan, such as post-graduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan.
This is why it's better in most situations to wait until after the grace period to enter a federal student loan consolidation program, since most loan accounts do not accrue interest until after the grace period is up. This allow a little more time before the federal student loan repayment time begins.
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