Federal Student Loan Consolidation Eligibility Requirements
Applying for a federal student loan consolidation is not an overly difficult process, but you must first ensure that you’re eligible to do so. The Higher Education Reconciliation Act of 2005 eliminated the option to consolidate student loans while still in school, so first and foremost, you must either be graduated, less than half-time student, or dropped out of school in order to be eligible for a federal consolidation loan.
That being said, students who have received PLUS loans are eligible to to consolidate those loans immediately after they’re fully disbursed. This is the only federal loan that follows these guidelines.
Defaulted student loans can be consolidated, but you must meet certain criteria in order to qualify. I recently wrote a post on this very topic that will let you know about the best way to handle a defaulted student loan so that it becomes eligible to be consolidated. This process often takes several months, so plan ahead.
In order to qualify for a federal Direct Consolidation Loan, you must have at least one Federal Family Education Loan (FFEL) or Direct Loan. A single loan can technically be rolled into a consolidation loan, although this option should only be considered if you find a much better interest rate by consolidating.
Interest rates on a federal consolidation loan cannot exceed 8.25%. So you should not even consider consolidating unless your interest rates are much lower than this figure. The advantage of a federal consolidation loan, however, is that the interest rate is fixed for the life of the loan. The exact interest rate is determined by a formula set by federal statute that takes into account your current interest rates and combines them to form a weighted average.
Summary:
Anyone who has at least one outstanding FFEL or Direct Loan can apply for federal consolidation. You must either be graduated, dropped out, or attending school less than half-time in order to consolidate your federal loans. The exception to the rule is with PLUS loans, in which you are eligible to consolidate upon disbursement if desired. Defaulted student loans can be consolidated, but you must first satisfy certain requirements to make the loan current.
Student debt can pile up faster than you may think, so do consider consolidating when you become eligible to do so. While it’s not the right option for everyone, in many cases it can help save money, reduce monthly payments and make it easier to manage large amounts of college debt.
Consolidating student loans is a way to reduce student loan payments, lower interest rates and to make student debt easier to manage. Here at Consolidating Student Loans, you'll find a wealth of information related to students loans and consolidation. Thanks for stopping by, and make sure to grab our RSS feed to stay up-to-date with the latest student loan news.
Nice concept on student loans. Student Loan Consolidation is the most important and very useful for the students to reduce their stress. Students need to follow some rules and restrictions to get loans. My cousin has taken this loan which reduced monthly payments, saved money and it was helped to manage large amounts.