Four Types of Federal Student Loan Consolidation

October 3, 2009 by  Filed under: Debt 

You can make use of federal student loan consolidation at any point of your education, when in school, university, or even when starting out on your career. The US government allows U.S. students to consolidate their federal student loans, enabling them to ease their financial worries. With the help of federal student loan consolidation you can significantly decrease the amount of your monthly installments and also gain from an extended repayment period. It is always more convenient to manage one loan program instead of multiple.

Federal student loan consolidation can fall in any of the following four categories:

Income Contingent Payment Plan

This type of federal student loan consolidation is complex in nature and depends on the student’s income in a given period of time. It also looks into the family’s yearly earnings, any other outstanding loan amounts to be paid, mortgages, and assets, if any.

Graduated Payment Plan

This type of federal student loan consolidation plan is ideal for students who are still in school and can only start the loan repayment procedure once they have graduated and found a job. The repayment period can extend up to 30 years. The installment amount is generally minimal in the beginning and gradually increases once in every two years. The idea is to slowly increase the interest rate to help the student pay back on time as his/her salary increases over the years.

Standard Student Loan Consolidation

This type of loan payment plan extends up to a maximum period of 10 years where the student needs to pay a monthly amount that remains fixed throughout. This is perfect for students who are comfortable paying a fixed amount every month.

Extended Payment Plan

This payment plan is very much like the standard student loan consolidation plan leaving out the repayment period that could extend anywhere between 15 and 30 years. The period of repayment largely depends on the nature of the loan taken by the student.

Most students opt for the extended payment plan or the graduated payment plan as these loan plans provide them with greater ease and flexibility. Usually when a student graduates and begins their new career, it is easier if the loan amount to be paid every month is as low as possible. Most students prefer to have an extended repayment period as it allows them to comfortably pay off the loan without struggling financially each month. As a student begins working, he/she might want to apply for other loans, such as a car loans or a mortgage, and when the payment amount for the consolidated federal student loan is reasonably low, it makes it easier for the student to handle all of this monthly debt.

Joe Eitel is an accomplished freelance writer who is an expert in the student loan consolidation field. If you’d like to learn more about federal student loan consolidation or other student loan related topics, visit: Consolidating Student Loans

Article Source: http://EzineArticles.com/?expert=Joe_Eitel

Joe Eitel - EzineArticles Expert Author

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