In a recent State of the Union Address, President Obama mentioned a Special Direct Consolidation Loan available to some borrowers with federal loans. This loan is not your typical Direct Consolidation Loan, and is only available for a brief period this year. This is a great opportunity for borrowers with the old, FFEL loans, as it will make managing repayment a much simpler task. Let’s take a look at how this loan works.

Background

First, let’s understand a little bit about historical student loans. Before Direct Loans came into play, the Federal Family Education Loan (FFEL) Program included four types of loans: Stafford, Unsubsidized Stafford, PLUS, and Consolidation. These loans, while still federally guaranteed loans, were made by private lenders and serviced privately. Now under the Direct Loan Program, federal loans are funded directly through the government (though there are four companies who service the loan on behalf of the Dept. of Education).
(more…)

For students about to graduate, you may want to check out the article New Grads, Start Thinking About Consolidation. This will give you helpful tips on why consolidation can be a good option.

Conversely, the article What NOT to do when Consolidating your Student Loans tells you just that. It provides useful information on the types of situations where consolidation might not be the best option.

While consolidation for federal loans is usually a good idea, it may not be so black and white with private loans. In the current economy, private lenders have been reluctant to grant consolidation loans. Should I Consolidate my Private Student Loans can help students to decide how and where to go to consolidate their private loans.

Still have questions about consolidation? This post may be able to help. From Our Forums: Consolidation Question Quartet! answers a few common questions about consolidating federal loans. Maybe it’ll answer yours. If not, you can always check out the Financial Aid Forum’s consolidation help section.

Hopefully these articles will proves useful in the upcoming months. Remember, if you need more information regarding loan consolidation, visit StudentLoanConsolidator.com.

Many graduating seniors are still in the midst of their six-month grace period before they have to begin student loan repayment. But for some lucky graduates who have secured a job and have the means, they may be interested in starting repayment before their grace period is up.

In almost all cases, the sooner you are able to start repaying your student loans, the better. There are no penalties or fees associated with early repayment, and in some ways, it can be beneficial.

You do not get a lower interest rate for repaying your student loans early, but if you think about it, the sooner you start, the less interest you pay long-term.

For many, student loan debt is one of the longest monthly debts they will face, and can take decades to fully pay off. There is nothing wrong with getting an early start. One way to make life easier is to consolidate your federal and private student loans. This will allow you a lower monthly payment.

Visit www.StudentLoanConsolidator.com to get started.

If you are about to enter your grace period, you might be wondering when exactly you should consider consolidating your federal student loans. For many seniors at four-year schools, they will be among the last to consider the variable interest rates for federal loan consolidation.

Currently, consolidation interest rates are projected to decrease slightly on July 1, 2010, so my suggestion would be to wait until early June, when the rates are officially announced, before consolidating.  Remember, this ONLY applies to borrowers who secured variable loans before July 1, 2006.  Federal loans taken out after that date are subject to a fixed model. If you have any questions about student loan consolidation, visit our forums!

Looking to consolidate federal and private student loans? While you can’t consolidate them together – and you wouldn’t want to anyway, you can take the consolidation of both types of loans to your advantage.

You can consolidate your federal student loans any time after you graduate or drop below halftime enrollment.  Always consolidate federal loans first. Consolidating your loans will improve your credit rating, and when you go to consolidate your private loans, which are credit-based, you will have a better score and most likely get a lower interest rate.

For more information on loan consolidation (federal and private), visit www.StudentLoanConsolidator.com.

Based on a great question from our Financial Aid Forum, I’d like to take a second today to talk about multiple loan consolidations.

Our reader asks:

I have new federal loans and old federal loans. I consolidated my old federal loans to a private company (great lakes) several years ago. Can I consolidate my new federal loans and my old loans that I consolidated once may years ago into one loan now? If so how do I do this and what would the rates be like currently for this type of consolidation. My new federal loans were disrupted after 2006 and my old loans which I consolidated in 2002 are at a rate of 3.25%. (more…)

You might be one of the lucky few who found a job right after graduation, and can afford to pay back your student loans immediately. First of all, stop bragging. The rest of us don’t want to hear it. But you might be considering early repayment. Is it worth it? Here are two things you must consider.

There is NO penalty for early repayment. You won’t be charged a fee or anything of the sort. In fact, early loan repayment can actually benefit you in the long run as it cuts down on your overall cost and can mean you pay less interest.

Early repayment will end your grace period. You are entitled to a six month grace period following graduation, during which time most folks consolidate their student loans and look to find a job or other means to start payment. If you decide to pay back your loans right away, you will be waiving your grace period.

NOTE: If you decide to attend graduate school, and take out loans for that, you will be entitled to a new grace period following completion.

One of the major benefits of student loan consolidation is that in most cases, it can lower your monthly payments and make repaying your loans much more affordable. In some cases, you can see reductions of up to half your monthly payment (estimated on the consolidation of $100,000 in federal loans.)

So, assuming you go out and apply for a consolidation… what would you do with that extra chunk of change?

Put some money away in savings? Get a car? Give us a shout!

Shakespeare aside, figuring out if student loan consolidation is right for you can be a tricky question. It largely depends on your income and loan interest rates, and isn’t always the right choice for every student.

Currently, both federal and private loans can be consolidated by their separate types. The point of it all is kind of like refinancing — you are trying to get a better interest rate on your loan and lower monthly payments, but also end up extending the repayment period (meaning you pay more overall.) Also, if most of your high interest loans are much smaller than the lower interest ones, consolidation may actually defeat the purpose of the cost savings.

The ideal situation and reason for consolidating loans is that they are large, have high interest, and you have a lot of trouble affording the monthly payments. Although having separate loans with different APRs and lenders may be annoying, a bad consolidation can end up costing you way more in the long run.

Many graduates waiver back and forth when deciding whether or not to consolidate their federal student loans. If you are one of those people here are three good reasons to consolidate.

1: Your monthly payments will be lower: Consolidating your loans extends your repayment term. Therefore, your monthly payments will be a lot lower than they were before. You can cut your monthly costs by as much as 50%.

2: Your life will be simpler: Instead of having to make payments every month to a bunch of different lenders you will only have to make one payment to one lending institution.

3: It is free: There are no credit checks, fees or application charges and you will not be penalized for early repayment.