How Do Government Debt Consolidation Loans Work

By Stephanie Robins on July 27, 2010, 7:11 am Posted in Finance News

The rising cost of getting an education and the declining state of the economy has created many graduates that cannot meet their monthly obligations due to the loans they received while still enrolled in college.

Who Qualifies For A Government Debt Consolidation

There are only a few criteria for these types of loans: First, the person taking the loan cannot consolidate anything that is currently paying for enrollment. Second, the debt to be consolidated must be in default, deferment, in grace, or repayment status. Lastly the loans must be either Federal Direct Loans or Federal Family Educational Loans (FEELs.) These can be subsidized or unsubsidized and include PLUS and Stafford federal loans.

What Are The Repayment Terms

There are several options for repayment and one must request the specific terms desired within 45 days of receiving approval or the default choice of the Standard payment will be enforced. Here are the 4 options that are offered.

1)The Standard Payment plan is a fixed monthly amount spread out over a 5 to10 year period depending on the amount of the loan.
2)A Graduated Payment Plan starts out with a low payment that increases every 2 years. The payment at the end of the term may get quite expensive.
3)Extended Repayment can only be given in cases of debt over $30,000. These plans can last from 10 and go up to 25 years, but the interest rates are usually higher.
4)Income Contingent Repayment. The payments in this instance are based on the income of the recipient, fluctuating with the income of the person. After 25 years if there is any remaining balance it may be forgiven.

How Do Government Debt Consolidation Loans Work

Who Qualifies For A Government Debt Consolidation

What Are The Repayment Terms

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