Should i special direct consolidation loan

The fixed interest rate for undergraduate Stafford loans first disbursed on or after July 1, and before July 1, is 4. The rate for graduate students is 6.

Most older loans from before July have variable interest rates. After , the interest rates are fixed, but change almost every year. The Department of Education web site has information about the fees the government charges when you take out a Stafford loan. There are limits on the amount of Stafford loans you can borrow. Stafford loan limits vary depending on whether you are financially dependent or independent. The higher independent student limits also apply to dependent students whose parents are unable to borrow PLUS loans.

The Department of Education web site has information about the fees the government charges when you take out a PLUS loan.

Unless the lender determines that extenuating circumstances exist, you will not pass the credit check if you:. Consolidation is similar to refinancing a loan. You can consolidate all, just some, or even just one of your student loans. Consolidating federal student loans may be a good strategy to lower monthly payments or to get out of default, but it is not always a good idea.

Direct consolidation loans are now the only type of federal student consolidation loan. Under the Direct Loan Consolidation Program, you can consolidate just about any type of federal student loan into a new Direct consolidation loan.

Loans that are not eligible for consolidation include state or private loans that are not federally guaranteed. Interest rates for consolidation loans are fixed. The fixed rate is based on the weighted average of the interest rates on the loan at the time of consolidation, rounded up to the nearest one-eighth of a percentage point. The interest rate must not exceed 8.

Consolidation loan borrowers should not be charged origination fees. You do not have to pay a fee or pay someone to help you get a government consolidation loan. Be wary of companies charging a lot of money for a free government program. The Department generally requires all borrowers to apply for Direct Loan consolidation using the studentaid.

Click Espanol to find a Spanish version of the on-line application. The Department strongly encourages borrowers to apply on-line, but you may also download and print a paper application to submit by regular mail. You can find out more about how to apply for a consolidation loan here. This is the section of this web siteabout consolidating out of default, but you do not have to be in default on your loans to consolidate.

With a few exceptions, you only get one chance to consolidate your government loans. You should consider the pros and cons of consolidation before starting the process. Among other potential down sides, you may lose important rights by consolidating. The Department gives this example: If you have both Direct Loans and other types of federal student loans, and you have been making payments toward public service loan forgiveness on your Direct Loans, you should not consolidate your Direct Loans along with your other loans.

Leaving out your Direct Loans will preserve the benefits on those loans. Prior to July 1, , married borrowers could choose to consolidate federal student loans from both spouses or jointly consolidate the loans of either spouse.

Both borrowers had to agree to be jointly and severally liable for repayment. This obligation continued even after divorce. Not surprisingly, this caused a lot of problems for borrowers and Congress eliminated the program as of July 1, If you remember, consolidation can be a great tool to manage your federal student loans. Special Direct Consolidation loans have a couple of added benefits:. For an explanation of the differences between these two types of federal loans, read my previous article on that topic.

Private student loans are ineligible for any federal student loan consolidation program. The program is part of a package of reforms announced in October by the Obama administration aimed at easing the payment of school debt.

National interest in student-loan relief is intensifying due to the rising debt burden of new college graduates. Professional-school graduates borrow substantially more. Borrowers of federally-backed student loans have a variety of options for managing and repaying their debt that range from simple to complex. After reading up on it, Buskey remains reluctant to participate. Servicers are offering an additional one-quarter percentage point rate discount if a borrower allows payments to be automatically withdrawn from her bank account.

The condition for receiving the full discount deters Buskey. I kind of like having multiple smaller chunks to pay at my own pace so I can stagger them a little if needed. Early on, a listserv of school financial aid officials circulated concerns that borrowers were receiving incomplete and potentially misleading information by at least one loan servicer. Terms available under special consolidation generally are more favorable. The problem stemmed from borrowers clicking on the wrong links on the Department of Education website.

Baxton was able to redirect the students who came to her for help. She said that if some of the students she counsels were going astray, she figured others likely were confused as well. Pamela Alonzo is a borrower who accidentally locked into a traditional consolidation loan not because she followed the wrong links but because she pursued consolidation too early and none of the Department of Education representatives she spoke with along the way advised her that special consolidation was coming.

Consolidating that many loans naturally was attractive and something Alonzo began considering in September as her six-month grace period for repayment neared an end. A year-old with experience in home ownership and a general interest in personal finance, Alonzo said she gave careful thought to the consolidation option, not wishing to exercise it prematurely. If you consolidate sooner, you have to pay sooner. However, the VIN News Service estimates that with the discounts available under special consolidation, her interest rate would have been about 6.

I was asking them, literally, what my options were with consolidation and if I should wait, and how is my interest rate calculated, etc. We tried to let borrowers know last fall this would be available in At one extreme is Sallie Mae , which has nothing on its main website about government student loans.

Asked where on the Sallie Mae website a borrower could find information, company spokeswoman Patricia Nash Christel provided an address to an auxiliary site that she said is shared with eligible borrowers. We will continue to counsel our federal loan customers on the options available to them under the federal programs and on the best possible management of their student loans, including the Special Direct Consolidation Loan, Income-Based Repayment and other options.

Nelnet, too, gives step-by-step instructions. The VIN News Service was unable to reach a Nelnet spokesman last week to discuss the complaints that surfaced about Nelnet when the program debuted in January.

Mary Roggeman, vice president of marketing at Great Lakes, said the organization continually receives updated lists of eligible borrowers, whom it attempts to contact via email and regular mail.

Letoutchaia spoke with Roggeman today and is waiting to hear back. FedLoan estimates that among the four million borrowers it services, one million are eligible for special consolidation. Initially, New said, FedLoan received applications a day. The rate has since risen to 1, a day.