Parents today are forced to opt for different student loan options to help children complete their education. Especially during these tough economic times, students find themselves stuck with one or more school debt that they are unable to manage and pay every month. Federal loan consolidation was introduced to help students consolidate and bring all their payments under one umbrella.
Student loan consolidation is offered by both commercial lenders and the U.S. Department of Education, to reduce strain for borrowers and streamline their debt into a single repayment program. Borrowers are offered extended repayment terms thereby reducing the amount they have to pay every month and making their budget manageable.
Students who have dropped to part-time, left school or have graduated can consolidate their Stafford loan. PLUS loans on the other hand can be consolidated after they have been disbursed completely. Direct loan consolidation repayment starts 60 days after the disbursal of loan.
Products that are eligible for consolidation include the Student PLUS, Parent PLUS, unsubsidized and subsidized Stafford and Perkins loans. Eligibility does not take into account whether it is from the Federal Direct Program (FDLP) or the Federal Family Education (FFEL).
It is not possible to consolidate a Perkins loan by itself. It can only be combined with another eligible product. Similarly, private loans are not eligible for direct consolidation. They can be consolidated only through a commercial lender.
As the direct loan servicing center will tell you, if you are delinquent or have defaulted in your payments, you can consolidate such only after fulfilling certain requirements. This requires you to make at least three voluntary, on time, consecutive payments to existing lender prior to applying for consolidation. Defaulters can also consolidate under the FDLP Income Contingent Repayment Plan where their income, amount borrowed and size of family are taken into account to adjust monthly payment amount.