"If you have been trying your absolute hardest to arrange college loan consolidation with no success then bad credit may be holding you back in terms of trying to consolidate all of your educational debts."

Student Financial Aid

What You Should Know About Direct Loan Consolidation Programs


Often brilliant students have to leave school in the middle of their studies because they cannot afford to fund their college tuition or fees. Some others get out of college heavily buried in debt and start their careers under the compulsion of taking any job so they can pay back the loan before the grace period is over. For both these categories of people there is one solution, the direct loan consolidation program.

What is the Direct Loan Consolidation Program?

The direct loan consolidation program is a system by which the debt consolidating agency pays off all your loans (which are relevant to your education and you want to consolidate) and then recovers that amount from you in easy, affordable, monthly installments. This means that after your debts have been consolidated you will have to pay only one monthly installment; this installment would usually be a tiny fraction of the amount you would have been paying before the consolidation of your debts. Another benefit of the direct loan consolidation program is that the interest rate is capped at 8.25 percent which is much lower than any other available loan.

Many people are not sure whether starting a direct loan consolidation program is a good idea for them. The easiest way to find out is to take a pen and paper and list the amount of loans you have outstanding, the interest charged and the monthly payment that is due. Then compare this list with the rates of interest, the monthly payment and the total amount that a direct loan consolidation program would offer you. If the latter compares well, then by all means go for it; because by doing so you will save thousands of dollars over the repayment period of time. But if the debt consolidation program compares badly, then drop the idea.

Before you decide on what you want and what you need, be sure you know the eligibility criteria:

* You can be in the grace period (of six months) or you would have already started repaying your loans
* The total of the loans to be consolidated should not be less than USD7500
* You have not already consolidated the student loans you have

Just to give you an idea, generally the reduction that a debt consolidation program will give you will be around 50 percent. Then you have the convenience of extending the period of repayment to 30 years (conditions apply) which can be a life-saver for those who scratch through with their daily living expenses. This is good for the amount of the monthly installment, but bad from the point of view of the total interest to be paid as a result of the extension.

When it comes down to any student facing the prospect of taking out a consolidation loan, the question you may be asking, is it worthwhile in terms of sorting out education debt?

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In this regard the best place you can ask information from would be a financial aid officer in your school/ college.