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Federal Loan Consolidation

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Federal Loan Consolidation

There are three federal direct loans that are considered outstanding types of school loans: parent loans, private loans and federal student loans. Each type of loan has a specific application process and has special eligibilities. College loans should be a last resort after you have received all the financial aid through Pell Grants and scholarships. Federal loans are offered after your Pell Grants are exhausted when you’ve filled out the FAFSA (Free Application for Federal Student Aid). Once you have completed college you may be in need of federal loan consolidation. This will help you stay out of debt and avoid extreFederal Loan Consolidation 228x300 Federal Loan Consolidationme amounts of interest being accrued as you are trying to pay your loans back.


Federal loans are handled by the Department of Education. Students ineligible for financial assistance through grants are still always eligible for aid through government student loans. When students are filling out FAFSA the same application is used for the federal direct loans. Consolidation becomes necessary when getting unsubsidized loans and later when subsidized loans are added to the mix. Unsubsidized loans are required to be paid back once they are loaned with no grace period. Subsidized loans are given a grace period of six months after the earning of a degree. Once you take on loans you become eligible for federal loan consolidation.
Stafford loans come in two different types. Subsidized Stafford loans are underwritten by the government and do not have to be paid back. Unsubsidized Stafford loans are also underwritten by the government, but they must be paid back once the student completes college. Both loans are only available for students going to an eligible university on a full or part time degree program. If you choose to pay back the subsidized Stafford loans they will not accrue any interest until the payback begins, the unsubsidized will start accruing interest from the moment they are claimed.


Federal loan consolidation includes your student loans and your unsecured personal loans as well. When you choose to consolidate your federal direct loans you are taking the right steps toward financial freedom each bit you pay back improves your credit score and lessens your chance to be audited as you are in direct contact with the government and they have a good idea of your financial situation.