Loan Consolidation

 

Debt Consolidation

 
 
 
 

 

 

Student  Loan Consolidation
 

For helping the student get the loans for pursuing studies in the USA , the Federal Loan
 

Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999.

Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).

In 2005, the Government Accountability

Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP.

 

Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs.[1] In 2008, turmoil in the financial and credit markets has led

Debt Consolidation Care

to the suspension of many loan consolidation programs, including Sallie Mae, Nelnet and Next Student.


Interest rates and payments:

Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan Consolidation loans have longer terms than other loans.
Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans.

The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as post graduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.

While included in the term "financial aid" higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:

Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well.

Federal student loans made to parents: Much higher limit, but payments start immediately.
 
Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances.

Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.

Account
A grouping of one or more Direct Loans disbursed by the U.S. Department of Education. Borrowers can have one or more accounts.
Each account has a unique number assigned to identify it. The format of an account number is your Social Security Number (SSN) plus a one-digit identifier added to the end (e.g., 123-45-6789-1). If you receive a notice that affects all of your possible accounts, the account number on the notice may be abbreviated to the Social Security Number only.

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Accrue
The process whereby interest accumulates on your loan. When we speak of "interest accruing on your loan," we mean that the interest due on your loan is accumulating.
Borrower
Individual who signed and agreed to the terms in the promissory note and is responsible for repaying a loan.

Cancellation
Some student loan programs allow for all or part of the total loan principal and accrued interest to be canceled in certain circumstances. A canceled loan may also be referred to as a "discharged loan."

Capitalization
Adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan. This occurs at the end of a deferment, forbearance, or grace period on Unsubsidized Loans, and at the end of a forbearance period on a Subsidized Loan.

Collection Costs
When a defaulted Direct Loan or FFEL is included in a Direct Consolidation Loan, collection costs of up to 18.5 percent of the outstanding principal and interest are added to the outstanding balance. When defaulted Perkins Loans and Health and Human Service (HHS) loans are consolidated, collection costs are also added. However, collection costs on these loans may exceed 18.5 percent of the outstanding principal and interest.

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Consolidation
The process of combining one or more eligible educational loans into a single new loan. The Direct Loan Program offers a Direct Consolidation Loan for those borrowers who are interested in consolidating their eligible educational loans.

Consolidation Hold
Delays the processing of your Direct Consolidation Loan until closer to the end of your grace period if any of the loans you want to consolidate are in a grace period.

Normally, when you consolidate your existing loan(s) into a new Direct Consolidation Loan, you will be required to start repayment of your new loan immediately. However, if any loan you want to consolidate is still in a grace period, you can delay entering repayment on your new Direct Consolidation Loan until closer to your grace period end date by entering your expected grace period end date (month and year) in the space provided on the application. We will start processing your application about 45 days before the expected grace period end date that you provide. If you leave the expected grace period end date blank on your consolidation application, your Direct Consolidation Loan will enter repayment immediately.

You can select a date up to nine (9) months into the future. If your grace end date is more than 9 months away, wait to submit your application.

Default
Failure to repay a loan according to the terms agreed to when borrowers signed their promissory notes. Default occurs when a Direct Loan borrower becomes 270 days delinquent in making payments on their loan(s). The consequences of default can be severe.

Default Aversion
The activities of a guaranty agency that are designed to prevent a default by a borrower who is at least 60 days delinquent and that are directly related to providing collection assistance to the lender.

Deferment
A deferment is a temporary suspension of a borrower's monthly loan payment. There are many different types of deferments available.
During deferment of subsidized loans, principal payments are postponed and interest does not accrue.
During deferment of unsubsidized loans, principal payments are postponed but interest continues to accrue. Accrued unpaid interest will be added to the principal balance (capitalized) of the loan(s) at the end of the deferment period. This will increase the amounts borrowers owe.

 

 

Loan Consolidation

Debt Consolidation

 

 
 

 

 
 

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