The government awards three types of financial aid for higher education: grants, loans, and work-study. In the loan category there are four major programs backed by Uncle Sam: The Stafford Loan Program, PLUS Loan Program, Consolidation Loan Program, and the Perkins Loan Program.
The following are details about the Consolidation Loan Program:
Details: Allows students and parents to consolidate a number of federal financial aid loans into a single loan to simplify repayment. This allows the borrowers to make one payment per month and in some cases obtain a lower interest rate.
Direct Consolidation Loans are provided by the U.S. Department of Education. They can be one of three types: Direct Subsidized Consolidation Loans, Direct Unsubsidized Consolidation Loans, or Direct PLUS Consolidation Loans.
FFEL Consolidation Loans are provided by participating banks, credit unions, savings and loans, and other lenders as either a Subsidized FFEL Consolidation Loan or an Unsubsidized FFEL Consolidation Loan.
Eligibility: You can get a Consolidated Loan once youíve started repayment or during deferment or forbearance. If you are in school, you can apply for a Direct Consolidation Loan if you are attending at least half time and have at least one Direct Loan or FFEL Loan in an in-school period. You may be eligible for a Consolidated Loan if you are in default on a Direct Loan.
To apply: Contact the Loan Origination Centerís Consolidation Department toll-free at 1-800-557-7392 or TTY 1-800-557-7395 or the consolidation department of a participating lender.
Cost: The interest rate is fixed throughout the repayment period and is the weighted average of the loans being consolidated. It will never exceed 8.25 percent.
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