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Federal student loan consolidation

March 16, 2024

In the United States, the Federal Direct Student Loan Program (FDLP) includes consolidation loans that allow students to consolidate Stafford Loans, Graduate PLUS Loans, and Federal Perkins Loans into one single debt. [1][2][3]

Interest rates and payments edit

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.[2][3]

History edit

The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).[3][4]

In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs.[1] In 2008, turmoil in the financial and credit markets has led to the suspension of many loan consolidation programs, including Sallie Mae, Nelnet and Next Student.

References edit

  1. ^ a b "GAO-06-195 Highlights, STUDENT CONSOLIDATION LOANS: Potential Effects of Making Fiscal Year 2006 Consolidation Loans Exclusively through the Direct Loan Program" (PDF). U.S. Government Accountability Office. 2005-12-01.
  2. ^ a b . Washington State University Office of Student Financial Aid. 2006-06-09. Archived from the original on 2007-03-14. Retrieved 2007-02-15.
  3. ^ a b c Potier, Beth (2004-02-05). . Harvard Gazette. Archived from the original on 2006-12-11.
  4. ^ "Types of Student Aid: Consolidation Loans". Student Guide 2001–2002. United States Department of Education.

Further reading edit

  • Teresa Boldt (2005-06-03). (PDF). National Student Loan Program. Archived from the original (PDF) on 2006-10-05. Retrieved 2007-02-15. {{cite journal}}: Cite journal requires |journal= (help)
  • Burd, Stephen (2005-08-05). "House Committee Approves Bill to Extend Higher Education Act". Chronicle of Higher Education.
  • . Pepperdine University School of Law. 2006. Archived from the original on 2007-11-24. Retrieved 2007-02-15.
  • "Federal Loan Consolidation". Northwestern University Office of Undergraduate Financial Aid. 2006. Archived from the original on 2005-06-03. Retrieved 2007-02-15.


  1. ^ https://studentaid.gov/understand-aid/types/loans/plus
  2. ^ a b https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized
  3. ^ https://studentaid.gov/manage-loans/consolidation
  4. ^ a b https://www.mohela.com/DL/resourceCenter/glossary.aspx
  5. ^ a b https://studentaid.gov/help-center/answers/article/ffel-program
  6. ^ https://fsapartners.ed.gov/knowledge-center/topics/health-education-assistance-loan-heal-information
  7. ^ a b https://studentaid.gov/help-center/answers/article/stafford-loan

March 16, 2024
federal, student, loan, consolidation, student, loans, regulatory, frameworknational, defense, education, higher, education, 1965, heroes, dept, education, fafsa, cost, attendance, expected, family, contributiondistribution, channelsfederal, direct, student, l. Student loans in the U S Regulatory frameworkNational Defense Education Act Higher Education Act of 1965 HEROES Act U S Dept of Education FAFSA Cost of attendance Expected Family ContributionDistribution channelsFederal Direct Student Loan Program Federal Family Education Loan ProgramLoan productsPerkins Stafford PLUS Consolidation Loans Private student loansIn the United States the Federal Direct Student Loan Program FDLP includes consolidation loans that allow students to consolidate Stafford Loans Graduate PLUS Loans and Federal Perkins Loans into one single debt 1 2 3 Contents 1 Interest rates and payments 2 History 3 References 4 Further readingInterest rates and payments editConsolidation loans have longer terms than other loans Debtors can choose terms of 10 30 years Although the monthly repayments are lower the total amount paid over the term of the loan is higher than would be paid with other loans The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated assigning relative weights according to the amounts borrowed rounded up to the nearest 0 125 and capped at 8 25 Some features of the original consolidated loans such as postgraduation grace periods and special forgiveness circumstances are not carried over into the consolidation loan and consolidation loans are not universally suitable for all debtors 2 3 History editThe Federal Loan Consolidation Program was created in 1986 In 1998 the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean effective February 1 1999 Consolidation loans taken out before that date had a variable interest rate determined by the individual FDLP loan origination center e g in the case of a university that university or FFELP lender e g a third party bank 3 4 In 2005 the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP Based on several assumptions about future variations in interest rates the loan volume the percentage of defaulters cost estimates from the United States Department of Education it concluded that while doing so would incur an additional cost of 46 million caused by the higher administrative costs of the FDLP compared to the FFELP this would be offset by a 3 100 million saving comprised in part of avoiding 2 500 million in subsidy costs 1 In 2008 turmoil in the financial and credit markets has led to the suspension of many loan consolidation programs including Sallie Mae Nelnet and Next Student References edit a b GAO 06 195 Highlights STUDENT CONSOLIDATION LOANS Potential Effects of Making Fiscal Year 2006 Consolidation Loans Exclusively through the Direct Loan Program PDF U S Government Accountability Office 2005 12 01 a b Frequently Asked Questions About Consolidation Loans Washington State University Office of Student Financial Aid 2006 06 09 Archived from the original on 2007 03 14 Retrieved 2007 02 15 a b c Potier Beth 2004 02 05 Amid the hype opportunity lurks for students with loans Harvard Gazette Archived from the original on 2006 12 11 Types of Student Aid Consolidation Loans Student Guide 2001 2002 United States Department of Education Further reading editTeresa Boldt 2005 06 03 FFELP Consolidation for Students Enrolled or In Grace A How To Guide for Financial Aid Administrators PDF National Student Loan Program Archived from the original PDF on 2006 10 05 Retrieved 2007 02 15 a href Template Cite journal html title Template Cite journal cite journal a Cite journal requires journal help Burd Stephen 2005 08 05 House Committee Approves Bill to Extend Higher Education Act Chronicle of Higher Education Federal Loan Consolidation Pepperdine University School of Law 2006 Archived from the original on 2007 11 24 Retrieved 2007 02 15 Federal Loan Consolidation Northwestern University Office of Undergraduate Financial Aid 2006 Archived from the original on 2005 06 03 Retrieved 2007 02 15 https studentaid gov understand aid types loans plus a b https studentaid gov understand aid types loans subsidized unsubsidized https studentaid gov manage loans consolidation a b https www mohela com DL resourceCenter glossary aspx a b https studentaid gov help center answers article ffel program https fsapartners ed gov knowledge center topics health education assistance loan heal information a b https studentaid gov help center answers article stafford loan Retrieved from https en wikipedia org w index php title Federal student loan consolidation amp oldid 1212089198, wikipedia, wiki, book, books, library,

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