Student Loan Consolidation

When students finish school, after having financed their education through federally-backed student loans, they are often faced with 5, 6, even 10 or more payments per month: one for each loan taken.  This is unwieldy from a bookkeeping and personal finance perspective, but there’s more to it than that too.

Those loans are probably at a relatively high interest rate, which can often be remedied with federal school loan consolidation options.  There are two such options: the Federal Family Education Loan Program (FFEL) and the Direct Consolidation Loan program (DCL).

The FFEL student loan consolidation plan is for consolidating FFEL loans specifically, though some lenders participating may be willing to combine other government-backed loans in this student loan debt consolidation program.

In a DCL student loan consolidation, all federal student loan programs must be considered for consolidation, including those which may have defaulted or missed payments.  The DCL, however, does not give the lowest student loan consolidation rate available, but it can have payments tailored towards income rather than loan amount.  So for those who have fairly heavy loan debt, this can mean a difference of monthly payments in the hundreds of dollars.

With an FFEL federal school loan consolidation plan, the interest rate is often lower, but the total amount of the loan is always a factor when working out monthly payments for the loan.  In the longer term, this is the better option for most people, because of the lower interest, but for many just starting out in the workforce, monthly payment options are more important for the near term.