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Take a Direct Approach

The Federal Student Aid’s William D. Ford Federal Direct Loan Program bundles in a consolidation loan along with the Direct Stafford Loans, William D. Ford Stafford and PLUS Loans, and Direct PLUS Loans.

Differences exist between the Federal Direct Loan Program and the Federal Family Education Loan Program. The FFELP is administered through student loan providers and lenders licensed by the feds to guarantee their loans.

However, differences such as loan limits, repayment periods and borrower incentives, further distinguish the programs.

Eligible Loans

How do you know if your loans are eligible for inclusion under the Direct Consolidation Loan? If you have one or more loans through the Federal Direct Loan program, you are qualified. In some cases your FFELP loans may be considered for a Direct Consolidation Loan if you’ve been turned down for a consolidation loan through your FFEL lender. Private loans of any kind are not eligible.

Direct Consolidation Loan Terms

The Federal Direct Loan Program was established to make more federal funds available to the students that need them most. In some cases this includes families with serious financial disadvantages. Criteria or terms of the Direct Loans allow for flexible repayment, and credit terms. They must in order for the program to work.

The Direct Consolidation Loan program terms include:

  • No credit check.
  • No extra fees associated with the loan.
  • Borrowers are not required to have a minimum loan amount. Many private lenders that offer the FFEL consolidation loans require a minimum loan amount.
  • Interest rate is fixed for the life of the loan. This change was effective July 1, 2006. The rate is determined by the weighted average of all your federal loans as of the day you apply for consolidation. That average is rounded up to the next 1/8 th percent. The government has established a ceiling of 8.25 on the rate.
  • Also unlike the FFEL consolidation loan, borrowers seeking a Direct Consolidation Loan may be eligible even if one or more loans are in default.

Reasons to Consolidate

Just because it seems as though loan consolidation is the current practice doesn’t necessarily mean it’s right for you. In the long run your education will cost you a lot more than what you might have paid otherwise, without a consolidation loan. Why? A consolidation loan slashes your monthly payments by 45 to 50 percent, but in order to make that possible, it features extended repayment terms. Depending on the amount of your loan you could be looking at 30 years of payments.

If, after weighing your financial situation, you are convinced a Direct Consolidation Loan is right for you, click this -> apply via online application, phone or print off a copy and fill it out in paper form.

Ref: http://www.collegescholarships.org/consolidation/direct.htm