FEDERAL STUDENT LOAN AND CONSOLIDATION OPTION
While the federal government has provided a number of options for students to get out of their student loan debt, one option that seems to be reasonable among them is the loan consolidation option. While this is not forgiveness program exactly, it still saves money for the borrower and will help with the students who are in huge student loan debt.
Which loans are eligible?
In this case, almost all federal student loans will be eligible for the direct consolidation loan program. This will apply for the following programs.
- HPSL: Health Professions Student Loans
- NSL: Federal Nursing Student Loans
- Federal and Federal Direct Stafford Loans
- SLS: Supplementary Loans for Students
- Federal Consolidation Loans
- Federal Direct Consolidation Loans
- Federal and Federal Direct PLUS Loans
- LDS: Loans for Disadvantaged Students
- FISL: Federal Insured Students Loans
- Federal Perkins Loans – both subsidized as well as unsubsidized loans
In any case, if the loan the student acquired is not mentioned in the above list, there are still chances that the loan might be eligible. However, it has to be checked with the loan service provider for confirmation.
Is Direct Loan Necessary?
While students can go with the direct loan option is definitely is not a prerequisite here. If the student as at least one of the federal approved student loans, then that will be enough to qualify for the direct consolidation option. Having a direct loan is not compulsory to get into the direct consolidation loan program.
What about Private Loans?
Many people think that federal loans and private loans go hand in hand. This is not the case. In the case of the direct consolidation loans, only the federal loans will be taken into account. That means that the loan should be classified under one of the federal government student loan program. Any loan which comes under the category of the private loan will not be considered for the direct consolidation loan option. There is still the option of consolidating the private student loans which happen to be processed in a different way.
What about PLUS loans?
PLUS loans can be taken into the Direct Consolidation option. But in this case, if the Parent PLUS loan should be put under this category then the borrower will not be eligible for the Income Based Repayment plan. This is not a wise choice as it may end up increasing the amounts of monthly payments. So when a borrower wants to go with this option, it is better to check with the loan service provider on all the possible options and the results of consolidating the federal loans.
What about Perkins Loans?
The Perkins Loans can be consolidated into the Direct Consolidation Loan program. In this case, there is a requirement where there should be at least one Direct Loan or at least one FFEL loan on request. This is because an individual Perkins loan cannot be put in the Direct Consolidation loan option. The Perkins loan put in Direct consolidation loan will be in the unsubsidized category which will take away all the benefits of the Perkins loan.