Some students are interested in taking out
a loan in order to pay for school. This is
not always as easy as it sounds, because the
money they owe is usually much higher than
they had expected. In order to make the right
choices, it is important that students familiarize
themselves with the different kinds of loans
available. One option is a federal
student loan, which includes unsubsidized
and subsidized Federal Stafford Loans, Federal
Perkins Loans, Parent Federal Loans and Graduate
Federal Loans. Your school will recommend
that you apply for specific loan products
first. It is in your best interest to follow
the school's instruction.
The Federal Family Education Loan Program
and the Federal Direct Loan Program are two
types of programs you can use to pay for school.
Both programs are governed by federal regulations
that determine the loan programs, loan limits,
and repayment options. If your college
participates in the FFELP, private lenders
will provide your loan funds. Your school's
Financial Aid Office can provide you with
a list of preferred private lenders. If your
college participates in the FDLP, your funds
will come directly from the federal government.
If you are thinking about applying, you should
know that the application consists of a short
federal form listing your contact information
and detailing the loans you owe, who currently
holds them and what the balances and interest
rates are. View a sample consolidation application
here. Using your Social Security Number, your
lender can verify your current loan information
in the national student loan data system and
fill in the loan information for you.
As soon as your application is complete, the
lender will substitute a new federal loan
in place of the loans you want consolidated.
You should continue to make payments on your
current loans until you receive a disclosure
statement and repayment schedule, detailing
the total amount of your consolidation loan,
the interest rate and the repayment schedule,
from your consolidation lender. No credit
check is required during the process and there
are no fees. Actually, the government prohibits
lenders from charging fees and no employment
verifications.
Keep in mind that any consolidation lenders
that you encounter are careful about your
personal information because a lender can
lose its right to do business for violations
of the strict government rules regarding borrower
privacy. The whole process can be completed
over the phone or online in about ten minutes.
You can even sign the application electronically.
Students who usually review documents should
know that most lenders will gladly email,
fax or overnight the form to you for manual
signature.
