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The 4 Types Of Direct Student Loan Consolidation

Written By adi mulias on Wednesday, September 14, 2011 | 7:09 AM

Like a student, do you find it hard to repay your student education loans? While student loans are great in that you and I will probably not have the ability to afford a tertiary education without it. On the additional hand, it can be difficult to pay the monthly payments on time because of the high interest rate and other external factors which may challenge your wallet.

If you have a difficult amount of time in repaying your student loans, you might want to think about a direct student loan consolidation.

So what is a direct student loan consolidation?

In essence, it is simply exchanging or consolidating your existing outstanding student education loans with higher interest rates for one loan with a far more manageable, fixed interest rate. The interest rate is based on the average of your loans, rounded to the closest 0. 125 per cent.

A direct student loan consolidation is especially useful knowing you are about to default on your monthly education loan payments. A direct student loan consolidation can mean a brand new start since it is considered a new loan.

Whenever you consolidate your student loans under a new loan, your existing loans will appear on your credit card as paid off, thereby upping your credit score.



Before getting a direct student loan consolidation, you need to know the types of plans with regard to repaying. There are four major types. You may like to investigate more to consider which is best to your requirements.

1. Standard Repayment Plan

Standard Repayment Plan allows you a fixed monthly payment for approximately 10 years depending on the amount you owe.

2. Extended Repayment Plan

An extended repayment plan allows you as much as 30 years. Obviously, the longer the period, the less amount you have to repay each month. Do note, however that you find yourself paying more as a whole if you spread your payment over longer amounts of time due to interest rates.

3. Graduated Repayment Plan

Graduated Repayment Plan will often have a repayment period between 12 and 30 years. The primary difference between graduated and extended repayment plan is with regard to graduated, the amount of your monthly payment will increase every 2 yrs.

4. Income Contingent Repayment Plan

If you have employment, then this plan may be what you are searching for. The income contingent repayment plan set a monthly payment depending on your gross annual income. Other factors include your family size and also the amount owe. The repayment period is usually 25 many years.

A word of caution, if you are close to paying down your student loans, then a direct student loan consolidation might not be suitable for you since you will be paying more due to interest rates over the long run.

However, if you have difficulty in repaying your student loans which is still years away from being paid off, then a direct student loan consolidation could be the answer. Not only do you pay less interest over the long run but it can improve your credit rating as nicely.
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