Student Loan Consolidation Info - Know Your Loan Payment Plan

If you think that you will have to take out a loan for college this academic year, you are wrong. That's right, the government has taken the initiative and taken steps to free up millions of dollars from the burden of college tuition. The federal student loan bailout started in March and has been extended another time on Dec. 3. It now ends on Jan. 30, 2021. It automatically places all federal student loans into administrative forbearance, delays in payments, and waive new interest on the loan balance for the balance owed. The good news is, it does this to help students in financial distress.

In order to qualify for the free government money, you need to meet certain criteria including being in default on your student loan already or in arrears. You also need to have a passing average in all of your subjects. To qualify for a student loan relief program, there are several quick application process steps you need to follow.

There is a student loan relief option available to those who have multiple federal student loans. The Obama administration created this program to help those borrowers facing difficult financial times financially. They are able to consolidate loans from multiple lenders and obtain lower monthly payments through a streamlined application process. One benefit of a federal government loan consolidation is the ability to extend or reduce loan terms. The federal government pays the interest while the borrower is enrolled in school so he or she does not have to pay the full amount.

During the consolidation process, borrowers must make sure that their lender is willing to work with them. This means they will want to discuss repaying the loan with the lender and explore all options. It will be helpful to bring any financial information with you to the meeting. For example, bring documentation regarding prior debts or expenses, if you have applied for a federal deferment or forbearance. The lender may offer a solution or new terms can be negotiated.

Loan consolidation works for student loan debtors who have at least one student loan. Consolidation allows borrowers to combine student loan payments into one monthly payment, thereby reducing the total cost of the loan. There are two types of student loan consolidations: direct and indirect. With direct unsubsidized loans, the student loan holder makes the payment directly to the lending company; whereas indirect consolidation requires the student loan holder to refinance the original loan while paying the new consolidated loan.

A borrower can defer paying his or her student loans for up to three years. If you defer your loan payments, your interest starts accumulating on the money you were supposed to pay. After three years, you will have to reapply for financing to defer the interest. Borrowers must first apply for a federal loan or a private student loan to defer federal student loans.

Many students choose to pay off their student loans early, before the grace period ends. This is especially beneficial for first-time and long-term borrowers. For borrowers with good credit, this is a good financial decision since it reduces the amount of interest paid for each month. However, borrowers with bad or poor credit may have a hard time getting a loan to completely pay off their student loans early. As of the end of the grace period, their payments will increase significantly, thus compounding the amount of interest they will pay.

Students with financial need should carefully review their student loan repayment plans with a financial adviser. Different repayment plans exist, and the repayment plan that is best for your particular situation depends on your income, monthly expenses, and your financial need. Students with financial need should research different sources of funding on campus, such as grants and scholarships. Many institutions offer a variety of financial need-based scholarships and loans that could reduce or eliminate your student loan payments altogether. The school's financial aid office can help you identify available grant and scholarship programs in your academic area.