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Q&A

Frequently Asked Student Loan Consolidation Questions

 

Q?

What is a Direct Consolidation Loan?

A.

It is the combination of multiple Federal student loans into a single new loan that offers multiple advantages.

Q?

What are some advantages of consolidating federal loans?

A.

• Only one payment each month makes it easier to manage debt
• Only one lender (U.S. Department of Education) also makes debt management easier
• May reduce the monthly payment amount
• Offers flexible repayment options
• Income Contingent Repayment
• Income-Based Repayment
• Pay As You Earn
• Repayment can be spread over a longer time period; thus, monthly payment amounts will be lower
• May allow borrower to renew deferment options

Q?

How long does it take to consolidate the loans?

A.

The process typically takes from 60 to 90 days from beginning to end.

Q?

What is Income-Based Repayment (IBR)?

A.

Depending on your income, family size, and state of residence, you may be able to have lower monthly payments under IBR than you would under the Standard (10 year) Plan. If your total amount of federal student loan debt is high compared to your income and family size, then you will be eligible for this plan. This program caps monthly payments at 15% of the borrower’s discretionary income. In addition to having lower monthly payments under IBR, any student loan debt that you have remaining after 25 years of making payments will be forgiven by the government.

Q?

What is the Pay As You Earn (PAYE) plan?

A.

If you have taken out a federal student loan in more recent years, you may be eligible for PAYE. This program caps monthly payments at 10% of the borrower’s discretionary income. After 20 years of making payments, the borrower’s unpaid student loan balance will be forgiven. To qualify for this program, you need to show that you have “partial financial hardship,” and you must have acquired your first federal student loan after October 1, 2007; additionally, you must have acquired a Federal Direct Loan or Direct Consolidation Loan after October 1, 2011.

Q?

What is a Perkins Loan?

A.

It is a federal, fixed-rate, subsidized loan given to undergraduate and graduate students based on financial need. The school lends the funds, which are granted to them by the federal government. There are no origination or default fees on this type of loan.

Q?

What is a Stafford Loan?

A.

This is a federal student loan, which may be subsidized or unsubsidized. Both forms of the Stafford loan require the borrower to fill out the Free Application for Federal Student Aid (FAFSA). Those who can show that they have "financial need" are able to receive a subsidized Stafford loan. Anyone is eligible for the unsubsidized Stafford loan. As of July 1, 2012, only undergraduate students are eligible to take out a subsidized Stafford loan; graduate and professional students are only eligible for the unsubsidized Stafford loan.

Q?

What is the difference between a subsidized loan and an unsubsidized loan?

A.

With a subsidized loan, the government pays the interest on the loan while the student is still in school full-time. If a loan is unsubsidized, then the student pays the interest, although payments usually don’t start until after graduation (usually 6 months after).

Q?

What is student loan default?

A.

If you haven’t made a student loan payment in over 180 days, then you are risking going into default. Once in default, your servicer can take different measures in order to collect unpaid student loan payments:

• Force your employer to garnish up to 25% of your wages
• Withhold or garnish your tax return funds
• Refer your case to a collection company who will add collection fees to your balance
• File a law suit against you

Q?

Who qualifies for student loan consolidation?

A.

• Only federal loans can be consolidated
• Must have at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan that is in a grace period or repayment
• Students who have graduated, are no longer in school, or are enrolled less than half-time typically qualify

Q?

What types of federal loans can be consolidated?

A.

• Direct Subsidized & Unsubsidized Loans
• Stafford Loans – Subsidized and Unsubsidized
• Direct PLUS Loans
• PLUS Loans – FFEL
• Perkins Loans
• Nursing Loans
• Health Education Assistance Loans
• Supplemental Loans for Students (SLS)

Q?

What are some of the repayment plans that exist?

A.

• Standard Payment Plan
• Graduated Payment Plan
• Income-Based Payment Plan
• Income-Contingent Payment Plan
• Pay As You Earn Plan
• Extended Payments

Q?

What is the interest rate of an income based repayment plan?

A.

Since an income based repayment plan is based solely on income and family size interest does not affect your payment. Notwithstanding the above, interest will continue to accrue at the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. This rate is fixed.

Q?

How long does it take to repay federal student loans?

A.

The default repayment schedule for a federal student loan is 120 months (10 years); this is called the Standard Plan. You may be able to extend your repayment schedule or may be eligible for Income-Based Repayment, so be sure to check out all of your options.

Q?

When does repayment begin after consolidation takes place?

A.

Once the consolidation process is complete and the loan is disbursed, you will have no more than 30 days to make the first payment.

Q?

While my loans are being consolidated, should I continue making payments on the loans separately?

A.

Unless you are qualified for forbearance, the answer is YES. Don’t fall behind on your student loan payments. Until you have been notified that the consolidation process is complete (30-90 days), you should continue to make your individual student loan payments.

Q?

Can I make an early repayment?

A.

YES. In fact, it is encouraged. Any amount paid in excess of your monthly payment requirement is put towards the principal and is interest-free. Note: You can make early payments by selecting the “Extra Payment to Principal” option on your payment schedule once you consolidate.

Q?

When should I consolidate?

A.

The most ideal time to consolidate your loans is right after you graduate, before your grace period comes to an end. This will enable you to get the lowest interest rate on your federal student loans and will allow you to reduce your monthly payment amounts. Even if your graduation and grace period are far in the past, it is not too late to consolidate your loans and take advantage of the low interest rates and reduced monthly payments now available to you! Call today and see if you qualify.

Q?

Will a credit check be required to consolidate my loans?

A.

No – the U.S. Government guarantees federal student loans

Q?

If I have already consolidated once before, am I able to do it again?

A.

• Yes, but only if…
• You have since acquired another federal student loan
• You have multiple consolidations from various lenders

Q?

What should I do if unable to consolidate?

A.

Other options include:

• Private loan consolidation
• Personal line of credit from your bank or credit union
• If I consolidate, do i retain my deferral or forbearance privileges?
• Yes. Consolidation allows you to keep federal borrowing privileges:
• Defer consolidation payments if you return to school
• Forbearance of your consolidation for up to 36 months

CONTACT US

At NATIONAL STUDENT ASSIST, we help thousands of people just like you consolidate their student loan debt. We look forward to helping you manage student loan debt. Please contact us for a no-obligation, free consultation today. Our friendly, professional student loan debt specialists are waiting to hear from you and ready to help resolve your student loan debt.

 

CALL US TODAY 800-264-2655
To discuss the options available to you – you may qualify for a payment reduction or student loan forgiveness!