Government Debt Consolidation Loans- Key Information About Them

For many students, higher education is no longer possible unless they opt for federal or private student loans.  Added to these loans are medical bills and debts arising due to irrational use of credit cards, thereby resulting in students graduating from the college with an average debt of $20,000 against their names.  A major percentage of these students even tend to default with their loan payments leading to troubled credit records.  As a result, students often find it extremely challenging to get approved for or received good terms for other services such as renting a home or getting approved for other financing or even some jobs.  With these issues in mind, the US federal government has now introduced a variety of government debt consolidation loans that are disbursed to eligible people through U.S Department of Education.  

Two of the most popular debt consolidation loans offered by the government are the Federal Direct Loan Program and the Federal Family Education Loan (FFEL). Both of these programs help people by paying off all the previously existing student loans and other debts of the person.  Then, a separate loan with renewed terms and better interest rates is issued to the borrower that is equivalent to the total of previous debts. Interestingly, one can consolidate any type of federal loan including Stafford Loans, Perkins Loans and PLUS loans under these loan programs. All that one has to do is to satisfy the eligibility criteria for each of these loan programs.  

Unlike private debt and bill consolidation programs, federal debt consolidation loans and government credit card debt counseling programs are advantageous in many ways.  

• Government debt consolidation loans are guaranteed by the federal government, interest rates on these loans are much lower in comparison to private debt consolidation loans. In general, these interest rates are determined by calculating the average rate of previous loans. Also, borrowers do have an option to switch over and accept loans from lenders offering better discounts.  
• Secondly, these consolidation loans provide students with certain additional benefits such as deferment and forbearance. Both these options are extremely beneficial for students who had already exhausted their deferment and forbearance options that existed on previous federal loans.  
• Even the terms and conditions on debt consolidation loans from the government are extremely convenient and affordable. Usually, these terms and conditions are determined after a careful assessment and analysis on existing financial condition of the student and the amount he/she can afford towards loan repayment.  
• Under certain situations, government credit card debt counseling is also provided so as to make students understand the importance of managing their credit records in a responsible manner.  
• Debt consolidation loans also help in improving credit records. Good credit scores are extremely important for students when graduating out of the college and planning to start an independent life. For many purposes, including employment, renting a house, or getting approved for various utility services, having good credit records is an essential prerequisite.  

One can avail themselves of government debt consolidation loans from any lender who has been approved by the government for issuing such loans. However, one should always shop around and negotiate with multiple lenders to help ensure they find the best deal.