Direct loan consolidation comes into the picture when most students borrow money at the time of going to college. One can be overwhelmed with student loans, especially when they borrow money from more than one lender. Luckily, there is a method of paying off the student loans that are borrowed from different lenders by making one payment every month. Direct loan consolidation allows a person to combine two different types of federal loans into a simplified single loan. In general, student loans can cause stress in the minds of students but direct loan consolidation will be a relief to each and every one of them.
Eligibility and Benefits of direct loan consolidation
Direct loan consolidation is very helpful for students who cannot pay for their different loans every month and want to avoid default. Then all payments could be grouped together and payment could be made to one lender at a time every month in small amounts. The major benefit in this is that the interest rates are fixed and very low. The rate of interest is fixed for the loan amount that is being consolidated. This type of loan is not of any use if you have almost paid off the loans. These kinds of loans need not be consolidated.
Direct loan consolidation has some eligibility criteria for a person to be qualified for it. He/she should either have a Federal Family Education loan or a direct loan, which should have repayment, grace, deferment or default status. When a person applies for this program while they are in school on or after 1st July, 2010 and before 1st July, 2011 will be eligible for the direct loan consolidation, which has an in-school status.
Direct loan consolidation lending rules
Direct loan consolidation can be availed of by following certain rules. Students as well as parents are able to consolidate their respective loans from any lender. Even though they might be from a single lender, you must consolidate them separately. This is because consolidation handles one borrower at one time. According to the Higher Reconciliation Act of 2005, consolidation cannot be done to the loans of married students. The reason for this is that if they get divorced the loan payment cannot be divided among them. The person is given the opportunity to choose his own lender which allows him to choose the lowest rates of interest among all. Most of the lenders require a minimum amount of balance. If a person uses the Federal Direct Loan Consolidation Program, the borrower does not require a minimum balance.
Direct Loan Consolidation is available in different types that are available for both the students as well as the parents. Though they are available, it is restricted as in only some loans are available for direct loan consolidation. Nursing Student Loans, Federal Insured Student Loans, Specialized Loan Servicing, Health Education Assistance Loan are some of the guaranteed student and direct loans. Some of the private loans also come under direct loan consolidation, depending on the lender.