Federal Direct Student Loan Consolidation

Federal Direct Student Loan Consolidation

A Federal Direct Student Loan Consolidation program allows students to bring the various loans that they have together so that they actually only have one debt.   As a result of combining all these loans together it will result in the amount that they are required to repay each month being reduced and the term of the loan can also be extended.

Also money is saved as any of these types of consolidation loans unlike other loans a student may take out come with a fixed rate of interest which is for the term of the loan.   So it doesn’t matter whether the loan you take out is for 10 years or even 30 the rate of interest charged on it will never alter so you know exactly how much you are going to have to each month to repay it.

So what requirements need to be met in order for a student to be eligible for a Federal Direct Student Loan Consolidation Program?

1.     The student must no longer be enrolled in school or are only enrolled on a part time basis.

2.    Any student wishing to take out such a consolidation loan must be in the “grace period” of the loan which they wish to pay off using this one or must be making repayments on their current loans regularly.

3.    Typically when it comes to being eligible for this type of loan a student needs to clearly show that they require borrowing at least $10,000.

Of course we all will have learnt about the benefits of taking out these types of loans.   But before you consider taking out one yourself it is worth considering what the disadvantages are.   Below we take a brief look at a few of the disadvantages of opting to have a Federal Direct Student Loan to consolidate any other loans you may have.

1.    As the period of repayments is extended then of course you will find that the amount of interest you are required to pay on this loan is more.   So it will cost you more over the term of the loan and could adversely affect your financial standing in the future.  Plus of course the rate of interest being charged on such loans is higher compared to other forms of loans.

2.    Applying for a Federal Direct Student Loan Consolidation program may not be worthwhile if you find that you have already paid off a large part of your loans.