How to Consolidate Private Student Loans into Federal Loans

Loan Consolidation and its purpose

Student loan consolidation is the process of combining several student loans or parent loans into single bigger loan. The bigger single loan amount is used to repay the balances on the older loans.

Consolidation of student loans is available for federal loans like Stafford, PLUS, Perkins, FISL, Health Professional Student loans, HEAL, Guaranteed Student loans and other direct loans.

In addition,  private loan consolidation is offered by some private lending institutions to students for educational purposes.

The main purpose of consolidation of is to manage loans in an easier way. The rate of interest for the consolidated loan is very low and also it improves the borrower’s credit score.

By consolidating several student loans, a student can plan their repayment schedule based upon his future financial position. Moreover, consolidation of loan helps the students to extend the term of repayment duration up to 30 years.

Benefits of Consolidating into Federal Student loans

It is always advisable to give first preference to federal loans and to consolidate them in priority. By doing so, students can save money. As they are offered at lower rate of fixed interest, the borrower can manage his debt by making single lower monthly repayment.

Basically, consolidation for federal loans should be made separately and it should not be combined with private loans.

The main reason for separate consolidation of federal and private student loans is that federal loans are offered at very low fixed rate of interest which will get overlapped by the consolidation rate of interest and this will be higher.

Eligibility to consolidate Federal loans

The U.S Department of Education offesr federal consolidated loan to those students who fulfill the eligible requirement as mentioned below

• The borrower must hold at least one of the direct loans or Federal Family Educational loan
• The loan obtained by the borrower should be in deferment or grace period, repayment or default status.

Consolidation Private Student Loans into Federal Loans

Also, private student loans which are not federally guaranteed are always considered to be ineligible for federal loans consolidation. However these loans can be separately consolidated by getting help from private lending institutions.

It is the responsibility of the students to choose a reliable institution and the best private consolidator who offers lower fixed rate of interest and flexible repayment terms.

Even though private loans are not considered for direct consolidation loans, they can be used for ascertaining the maximum repayment period.