The Benefits of Direct Loan Consolidation

One of the benefits of Direct Loan Consolidation is that it provides borrowers with a more convenient and flexible way of paying off one or several of their federal education loans.  In this process, the U.S. Department of Education is the only lender, and after consolidating all of the loans into one, only one payment is needed.  This takes away the hassle of dealing with several lenders and several monthly payments.  It is a much easier way to manage debt, and it is offered as a free service.

Direct Loan Consolidation offers four repayment plans that are both flexible and changeable according to the borrower’s needs.  The standard plan option sets a borrower up with a fixed payment amount of $50 or more to be payed over a period of up to 30 years.  The graduated plan sets the borrower up with a low payment that is the equivalent to built up interest, and then raises the payment every two years.  For loans over $30,000, the extended plan allows borrower’s to pay off there loans within 25 years while using their choice of either the standard plan or the extended plan.  Finally, the income contingent plan is a 25 year plan which bases the borrower’s payment on their  annual income, and how many people are in his or her family.  Each of these options revolve the payments around the overall federal student loan debt.

New deferment options and the retention of subsidy benefits  are also benefits of Direct Loan Consolidation.  The deferment options are good news for borrowers who have already used up all their deferment benefits on their current loans.  Not only will these options be renewed, but in some cases, they will be added to.  The options are good because they allow the borrower to delay payment on their loan for a specific amount of time without raising the payment amount or changing the loan agreement.  As long as the loans are subsidiary  student borrowers will maintain the same amount of interest during the deferment period.

The best benefit, and really the main focal point, of Direct Loan Consolidation is that by combining several loans into one, it reduces monthly loan payments so that the borrower can afford to pay them in a timely manner.  This combined with the flexible option plans, and the deferment options leave little risk of a loan going into default.  In this day and age, it is always a good thing when borrowers can keep up with their loan payments.