Federal Consolidation Loan | Federal Student Loan Consolidation

It is quit true that there are various consequences that a student has to face at the end of month when the time comes for the monthly payment of loans, but there if there is a problem then it also has a solution and the solution for the different kinds of student’s loan payments is Student loan Consolidation. Federal student loan Consolidation is the tool that allows the student to combine the different loans for their studies in a single consolidated loan; this enables the students to look after at just one loan instead of many others. The main reason why the Federal Consolidation Loan is preferred is that it enables the lender to design one schedule for the repayment of all sorts of loans. Whereas, on the other hand the students do not consolidate their loans than they will not only have to make repayments for several loans but ultimately this will also result in a much greater interest rate at the end of time, that means lender will end up paying five to ten times more than the amount of they had originally borrowed.

After having a brief introduction to the subject matter certain pros and cons related to Federal Student Loan Consolidation are being defined as following:

·         First and for most thing is that the monthly payments are much lesser.

·         Just a single bill is generated on the name of borrower.

·         Federal Consolidation Loan does not impose any sort of penalties on the prepayment.

·         Interest rate is fixed in the case of Student loan Consolidation.

·         Best part is that there is no fixed number of loans that can be consolidated under the title.

However, on the other hand there are certain disadvantages as well which are also related to the Federal Student Loan Consolidation which is listed below:

·         Form one consolidated loan results in increasing the duration of the repayment of the loan.

·         Student loan consolidated, involves a risk of loss related to incentives of the in progress loan.

Although it is a fact that Federal Consolidation Loan has certain advantages and disadvantages but despite of which it provides far more better solution for the student lenders and eventually enable them to workout the different loans help the students to plan their future in a better way.

Consolidate student loans | Loans Consolidate for Students

Loans are of different forms but that loan is the best which proves to helpful for the students in achieving the right kind of education and the education they desire for so that they may achieve what they want in the near future. In most of the cases it has been observed that students have to leave their colleges and education just because of the burden of loans because they lend loans from different sources which ultimately results in the repayment for much more than actual amount, however, student consolidation loans can be the best solution for such problems.

                      

Student consolidation loans is the solution to all the problems and payments of different kinds of loans because by the help of student consolidation loans all the other forms of student loans is lined under one head or a single form of loan that leads to only one payment plan resulting in relief and comfort for the students. In order to understand the loan consolidation you may take the example of a home mortgage which is being refinanced. When someone consolidate student loans; the amount which is in the form of debt for the student is being paid off and the payment of amount which has to be made by you is transformed in the form of immense consolidated loans, in this way you do not have to suffer consequences of paying the several loans instead just one loan has to be paid which is the consolidated loan.

The loans can be consolidated by both i.e. the students and the parents both. There are various reasons and benefits for which you can consolidate student loans, for example: by the help of consolidated loans the lender has to pay a fixed rate of interest for the time being or the duration of loan which definitely is a good source for saving thousands dollars each other. It also is useful in decreasing the payments that is being paid monthly on the other hand it sum ups all the loan payment in the form of one monthly bill.

In addition to the facilities mention above there are several other advantages as well of the consolidated student loan. One does not have to worry about the repayment cause of the reason that consolidation loan offer options for flexible repayments along with no charges or fees or even penalties, as well as no co-signers or checks are being required. Hence consolidate student loans prove to be the best alternative against the frequent loans.

Student Consolidation Loans - Best Consolidation Loan Students

Consolidation loans are a form of tool that permits an individual to join together the various kinds of that which are being used by the federal students in order to shorten and make simpler the process of repayments. There are two different kinds of programs which are offering the loans that is the direct loan and FFEL, one does not need to have various loans in order consolidate; just one loan can also be consolidated via the help of these programs.

                                                    

One of the most common forms of loans that are required to be consolidated is the student loans. Finding and discovering student loan consolidation is not as difficult as it is being considered and that is because there are several student loan consolidation centers that are working for the same cause, however the difficulty arises when people are looking for the best consolidation loan student programs. The most important thing that is required for the consolidation loan is the terrific loan balance. The main problem that arises in the student loan is the interest rate that one has to pay and usually these have a higher interest rate which takes a longer period of time for its repayment, this will ultimately end up in consuming a high amount of money in the form of interest rates and another thing, needless to mention, is the hidden charges of contract. However, the student loan consolidation program can save all such cost and extra amount of money that one is obligatory to pay in the student loans. For those looking for the loan consolidation, the definition for the best consolidation loan for students may be locating the lowest rate because it is not as easy as locating the student loan consolidation centers. The other possible options for the students is to go for the federal government, the reason for this is that they comparatively have a much lesser rates of interest as compared to that of private loans. The reason why these private loans have a much higher interest rate is that they are being offered by the private banks, due to which their interest rates are higher and on the other hand they also have a contractual documentation which also is added in the loan rates, all these ultimately increases the interest rate. Apart from the banks there are certain private companies as well that are working for providing the student loans but one should aware and cautioned of such organizations because these are only the profit making organizations. It is therefore necessary that the student or the loan seeker should prudent while making their choice for the student loan consolidation program.

A Temporary Window of Opportunity is Closing Soon: Do You Need to Take Action Now?

When President Obama signed the Health Care and Education Reconciliation Act of 2010 (HCERA), Public Law 111-152, on March 30, 2010, the bill included temporary changes to the conditions under which a borrower may consolidate loans into a Federal Direct Consolidation Loan. These changes apply only to a Direct Consolidation Loan that is made based on an application received by the U.S. Department of Education on or after July 1, 2010 and before July 1, 2011.

Borrower Eligibility Under the HCERA Temporary Consolidation Authority
If a borrower's Consolidation Loan Application and Promissory Note is received by the U. S. Department of Education before July 1, 2011, the borrower may consolidate a loan that has not yet entered repayment status, including a loan that is in an in-school status, if the borrower meets the following requirements:
1. The borrower has one or more loans from two or more of the following categories: (i) FFEL Program loans that are held by an eligible lender; (ii) FFEL Program loans that have been purchased by the Department ("PUT" Loans); and (iii) Direct Loan Program Loans.
2. The borrower has not yet entered repayment on one or more of the loans in any of the categories in #1.
3. The borrower is not consolidating any loans other than loans from the categories listed in #1.

Interest Rate Calculation for Loans made under the Temporary Consolidation Authority
For any Direct Consolidation Loan made to a borrower under the temporary consolidation authority, the interest rate will be calculated as follows:
1. Unless the borrower is consolidating certain loans that have a variable interest rate (see below), the interest rate on the Direct Consolidation Loan is the lesser of (a) the weighted average of the interest rates on the loans being consolidated, or (b) 8.25% (that is, the interest rate is calculated in the same manner as the interest rate for a regular consolidation loan, but without the rounding up to the nearest higher one-eighth of one percent).
2. If one or more of the loans a borrower consolidates is a Federal Stafford Loan (subsidized or unsubsidized), a Direct Subsidized Loan, or a Direct Unsubsidized Loan with a variable interest rate that is lower during the in-school, grace, and deferment periods, the interest rate on the Direct Consolidation Loan is the lesser of (a) the weighted average of the interest rates on the loans being consolidated, rounded to the nearest higher one-eighth of one percent, or (b) 8.25% (that is, the interest rate is calculated in the same manner as the interest rate for a regular consolidation loan).

Factors for Borrowers to Consider Before Consolidating
Because a Direct Consolidation Loan enters repayment on the date the loan is made, there are important factors a borrower needs to consider before deciding to consolidate loans into a Direct Consolidation Loan under this temporary authority.

Grace Period: There is no grace period on a Direct Consolidation Loan made under the temporary authority. The 6 month grace period is a unique feature of the Federal Student Loan Program, designed to allow borrowers to become established in their new careers before they begin repayment on their student loans. As with an in-school deferment, the interest is paid on the borrower’s subsidized loans while they are in grace. This can amount to a significant savings.

If a borrower consolidates while still in school on at least a half-time basis and before the loan has entered the grace period, the borrower will not receive a grace period on that loan after the borrower ceases to be enrolled on at least a half-time basis. However, the borrower will be eligible for an in-school deferment on the Direct Consolidation Loan while enrolled at least half-time at an eligible institution. (Note: If the borrower’s loans enter grace before June 30th, and wants to wait to consolidate until the end of the grace period by completing Item 17 in section C1 of the Direct Consolidation Loan Application and Promissory Note. Another word of caution, borrowers who delay applying until their loans enter the grace period and whose application is received by the Department before the July 1, 2011 deadline may receive the modified interest rate associated with the temporary authority, provided that they are not consolidating certain variable interest rate loans, as explained above.) Contact Direct Loans for information regarding the effects of consolidation on your student loans. Call 1-800-557-7392 or on-line @ http://loanconsolidation.ed.gov/ .

PLUS Loans: Borrowers with Federal PLUS Loans or Direct PLUS Loans that were first disbursed on or after July 1, 2008, are eligible to defer repayment of these loans for a 6-month period that begins on the date the borrower (or the dependent student on whose behalf the borrower obtained the loan) ceases to be enrolled at least half-time. Parent PLUS borrowers are also eligible to defer repayment while the dependent student is enrolled in school on at least a half-time basis.

If a PLUS borrower consolidates a PLUS loan while the borrower (or the dependent student) is still enrolled in school at least half-time, or during the 6-month post-enrollment deferment period, the borrower will lose eligibility for these deferments. Again, for detailed information on Consolidating and its effects on your personal loans, contact Direct Loans. Call 1-800-557-7392 or on-line @ http://loanconsolidation.ed.gov/ .

Personal Financial Decisions Require Research, Analysis and Thoughtful Decisions
You have probably already received mail concerning your student loans and the June 30th deadline for this one-time opportunity. There are many benefits to consolidating, including: lower payments, combining multiple servicers & payments into one location/payment, and the return of deferment or forbearance rights on older loans that may have exhausted these options. However, as we all know, there are no perfect solutions that will work for everyone. As with any personal financial decision, make sure that you evaluate and weigh all of the facts before you make a decision.

Finally, there is one disadvantage a SWFC student or former student will encounter if you decide to consolidate your loans. As you know, SWFC’s Financial Literacy staff monitors the accounts of our loan borrowers and help students if their loans become delinquent. We gather our documentation based on an ID that identifies your loans as originating with SWFC. Once the loans are consolidated, this ID link is removed, so we no longer automatically have access to monitor the status of the consolidated loans. In an effort to help our former students who want to take advantage of student loan consolidation, we have established a special process to assist SWFC borrowers with their consolidated student loans. If you have questions regarding consolidation and your student loans, please contact us @ helpwithloans@swfc.edu and we will be happy to help you gather the information you need to make an informed decision regarding consolidation and your student loans.

Tax Refund? Be Sure to “Pay” Yourself First!

So you received a tax refund check – Lucky You! Getting a lump sum of money is fun. Sometimes I think that dreaming of all the ways you could spend it are the biggest part of the fun – a well deserved vacation, a shopping spree, down payment toward a car……you can spend days dreaming and planning. However, before you make your final decision, think about “paying” yourself first! Seriously, would you like to would you like to make 47% on an investment? Sounds like a ponzi scheme or something but the savings are real and you can turn part of your tax refund into some serious money for yourself.



If you follow this Blog, then you know that I am a huge proponent of making small additional payments to “chip” away you student loan debt. However, paying larger sums toward your student loan will also help, significantly – even if it is only a one-time payment! Let’s look at two scenarios, to see how making a lump sum payment can benefit you. Each of these will be based on a $20, 000 loan debt, at 6.8% interest, with standard 10 year repayment plan.



Scenario 1: Payment of $1,000

No Extra Payments -----------------------With Extra Payments

Monthly Payment $230.16 -----------------.-Monthly Payment $1,230.16

10 years Pay-off time ============ --==7 years 8 months Pay-off time

$7,619.28 Interest Paid Inte=====..===rest$6,149.15 Interest Paid



Advantages of Additional Payments:

2 years 4 months Time Saved

$1,470.13 Total Interest Savings



Balance Schedule for Scenario 1:

Year ---No Extra Pymt ---With Extra Pymt

2011 ---$18,553.54 --- ===$18,553.54

2012 =-$17,005.60 =====-$17,005.60

2013 -=$15,349.06 ==.== .$15,349.06

2014 --.$13,576.29 ===..=-$12,524.12

2015 =-$11,679.15 =====-$9,489.03

2016 =-$9,648.90 ======$6,240.99

2017 =-$7,476.21 =====-=$2,765.07

2018 = $5,151.09 ====== $0.00

2019 =.$2,662.83 =====.,,$0.00

2020 =.$0.00 ======.==$0.00



Scenario 2: Making $500 additional Payment

No Extra Payments ================With Extra Payments

$230.16 Monthly Payment ===========$730.16 Monthly Payment

Pay-off time 10 years ==============..Pay-off time 8 years 8 months

$7,619.28 Interest Paid =============-$6,733.53 Interest Paid



Advantages of Additional Payments:

1 year 4 months Time Saved

$885.75 Total Interest Savings



Balance Schedule for Scenario 2:

Year =-No Extra Pymnt =With Extra Payments

2011 =-$18,553.54 =====$18,553.54

2012 =-$17,005.60 ====-$17,005.60

2013 =-$15,349.06 ====-$15,349.06

2014 =-$13,576.29 ====-$13,050.21

2015 =-$11,679.15 =====$10,584.09

2016 =-$9,648.90 ====.=$7,944.95

2017 =-$7,476.21 =====.$5,120.64

2018 =-$5,151.09 ====.=$2,098.19

2019 =-$2,662.83 ====.=$0.00

2020 =-$0.00 =======-$0.00



If you would like to see how different amounts of “lump” sum payments can help you clear those loans faster, visit http://www.mortgagecalculatorsplus.com/calc-additionalpayment.php .

PAY YOURSELF FIRST – You Deserve It! It is tempting to splurge and spend your tax refund check on something fun or frivolous – I am not talking about using your whole refund to pay toward your student loans. I am a believer in having your cake and eating it too. However, if you will take just a small amount and pay toward your student loan debt, you can significantly shorten your repayment period. Think of all of the ways you could spend the money you currently have to pay on your student loan monthly payments once they are GONE! Now that’s something fun to dream about!

QUICK PRIMER ON EDUCATIONAL TAX CREDITS

By popular demand, we are repeating an article from last January:
SWFC Financial Literacy Department's
QUICK PRIMER ON EDUCATIONAL TAX CREDITS

There are four tax benefits for college education expenses:
· Tuition and fees tax deduction
· The American Opportunity Credit
· The Hope Credit
· The Lifetime Learning Credit.




The Tuition and Fees deduction will reduce your taxable income. The Hope Credit, Lifetime Learning Credit and American Opportunity credit can reduce your tax bill. The American Opportunity credit replaces the Hope credit for 2009 and 2010, and provides a partially refundable credit. Taxpayers should investigate all of their options and choose the credit that will give them the lower tax responsibility; however, they cannot claim more than one credit or a credit and deduction for the same expenses. You cannot “double dip”. The education tax credits are calculated on IRS Form 8863 (PDF).

The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit can provide up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. Forty percent of the credit (up to $1,000 maximum) is refundable. This is unique to the American Opportunity Tax Credit. The tax credit is scheduled to have a limited life span and, unless Congress extends the credit to additional tax years, it will be available only for the 2009 and 2010 tax years.

The Hope Credit is a tax credit for college students in their first two years of college. It provides a tax credit of up to $1,800 on the first $2,400 of college tuition and fees. The Hope Credit can be claimed on your tax return if you, your spouse, or your dependent are a first-year or second-year college student, is enrolled at least half-time at an eligible education institution, and you were responsible for paying college expenses. If you missed this credit in the past, it might be possible to file an amended tax return for the year(s) in question.

The Lifetime Learning Credit is a tax credit for any person who takes college classes, even if you took only one class. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. The total credit is limited to $ 2,000 per return, but you can claim the Lifetime Learning Credit if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses.

If you use the Income Based Repayment plan (IBR), you can also file IRS form 4506-T to allow the IRS to release your AGI information directly to your loan's http://www.irs.gov/pub/irs-pdf/f4506t.pdf


A final word of caution – Patience is a virtue that can pay BIG $. Do not fall victim to so-called "instant" or "same-day" refunds. These are actually short term bank loans, and most have exorbitant fees. According to Brendan Conway (Contributor to The Christian Science Monitor / March 2, 2009), in some cases, that means a mind-boggling 1,300% when calculated like a credit-card’s annual percentage rate. Electronic refunds are generally processed within 15 days and a refund returned by mail will usually be received within 3 to 4 weeks.

A QUICK REFERENCE GUIDE
American Opportunity Credit

1. $2,500 in tax credits on the first $4,000 of qualifying educational expenses.
2. Up to $ 1,000 may be refunded.
3. Can be used for Education expenses paid with borrower funds (student loans).
4. Can be claimed for the first 4 years of post-secondary education expenses.
5. Available ONLY for 2009 & 2010. Applies to all four years of undergraduate college education.
6. The American Opportunity credit also features an expanded definition of qualifying expenses.

Hope Credit

1. $1,800 of qualifying educational expenses paid for each eligible student.
2. Can reduce taxes to $0. Excess funds cannot be refunded.
3. Can be used for Education expenses paid with borrower funds (student loans).
4. Available ONLY until the first 2 years of post-secondary education are completed.
5. Available ONLY for 2 years per eligible student.
6. Student must be pursuing an undergraduate degree or other recognized education credential.
7. Student must be enrolled at least half time for at least one academic period beginning during the year.
8. No felony drug conviction on student's record.

Lifetime Learning Credit

1. Credit of up to $2,000 based on qualified tuition and related expenses paid for all eligible students. (This can reduce taxes to $0. Excess funds cannot be refunded).
2. Can be used for Education expenses paid with borrower funds (student loans).
3. Available for all years of post secondary education and for courses to acquire or improve job skills.
4. Available for an unlimited number of years.
5. Student does not need to be pursuing a degree or other recognized education credential.
6. Available for one or more courses.
7. Felony drug conviction rule does not apply.
   
   This information is provided by SWFC to increase student awareness of possible Education Tax Credits and Deductions. We are not Tax Preparation experts. Students interested in using any of these credits or deductions should consult a Tax Expert or the IRS.
   
   IRS Form 8863Publication 970, Tax Benefits for Education

Names can be confusing – especially when it comes to student loans.

A Rose is a Rose is a Rose … Names can be confusing – especially when it comes to student loans. You thought you paid that loan yet you are still getting late notices! What’s going on???

The student loan industry is still undergoing monumental changes that can be confusing for student loan borrowers. Even though Direct Loans became the single source for student loans as of July 1, 2010, life is not necessarily simpler. Direct Loans is now using several private companies to service their student loan portfolio. You may think of Direct Loans as your lender but they probably will not be the company servicing your loans. As of December 2010, in addition to the original Direct Loan Servicing, there are now four additional servicers who are handling student loan accounts for the Direct Loan Program. They are:
· DOE/Great Lakes
· DOE/NelNet
· DOE/Sallie Mae
· FedLoans (also known as PHEAA or AES)

It is important to understand that these DOE servicers are separate companies from their FFELP counterparts, with separate mailing addresses and phone numbers. They all also service loans under the FFEL loan program so you may have other student loans handled by Great Lakes, NelNet, Sallie Mae or PHEAA (AES). You may have the phone number for this servicer programmed into your speed dial. However, as separate companies, the DOE/servicer will have separate phone numbers and mailing addresses. Now that I have probably confused you, let’s review a few situations and see if we can help make your student loan life a little easier.

First Scenario – you thought you had a handle on who had your student loans; now, you called your servicer and they no longer have your loans. Yikes! Where are they? What’s going on? There was a large volume of FFELP loans that were sold to DOE in October 2010. This resulted in a lot of loan movement for borrowers. The good news is that this was the final loan sale authorized under the PUT program. However, as other loans were sold under the PUT program over the last few years, borrowers often went from one FFELP servicer to two or more DOE/servicers. Something simple became very bewildering. The DOE (Department of Education) has recognized the confusion created by this program and they are in the process of re-sorting their DOE/Servicer accounts to group all of a borrower’s DOE accounts to one DOE/Servicer. This may result in some additional, initial confusion as the loans are sorted and reassigned, but the DOE assures us that this process should be complete by mid-January and all borrowers with Direct or DOE held loans will have their loans serviced by one servicer. Happy New Year!

Second Scenario - you thought you were paying those loans and yet you keep getting a late notice or calls about delinquent loan payments. There are two possible answers to this scenario. The quickest and easiest explanation is that you have a loan or loans that were recently sold to another servicing company. Contact the company at the phone number referenced in the letter to see what is going on. You should be able to resolve this fairly quickly. The slightly trickier and more common problem occurs when you have loans serviced by both the FFELP servicer and the DOE servicer. For example, you have loans with Sallie Mae and you are making payments; however, you are getting letters from DOE/Sallie Mae saying you are delinquent. You must remember that, even though the names are similar, your loans are being serviced by two different companies. To resolve the current situation, call DOE/Sallie Mae and get a solution in place (payment, adjusted payment plan, deferment or forbearance). Our Tip for Future Contact: If you have the dual servicer situation, make it a habit to always contact the DOE/servicer first. This is based on a provision regarding federal payments, “lockboxes” etc. It can be confusing, but if you will simply get into the habit of contacting the DOE/servicer, you may still resolve your dual serviced student loans with one phone call. The customer service representatives from the DOE side are allowed to discuss both sets of accounts with you; however, the customer service representatives from the FFEL side are not allowed to discuss the DOE accounts with you. So… if you contact your FFELP servicer first, unless you ask to be transferred to the DOE/Servicer, you will have to call back to resolve those accounts.

Resources for Student Loan Management
A student loan borrower’s best source of student loan information remains NSLDS. The website, http://www.nslds.ed.gov/ will provide you with the most current information on all of your student loans and can be easily accessed 24/7 with your PIN. (Our Tip: If you have forgotten your PIN, visit http://www.pin.ed.gov/ and request a duplicate PIN). If you receive any mail from a student loan company, always open the mail and read the information. Trust me, in today’s economy, a company is not going to go to the expense of mailing letters or making phone calls (even “robo” phone calls) without a valid reason. As the borrower who can potentially be negatively impacted by adverse actions on student loans, you cannot afford to ignore any correspondence regarding your student loans. If you do not understand the information, either contact the customer service number listed on the letter or contact your school’s Financial Literacy department for assistance.

Each DOE/Servicer has a website where borrowers can download forms, review their accounts, make payments and request payment relief assistance. If you are a SWFC student or alumni, you can contact our financial literacy department and we will be happy to help locate your servicer’s website and set-up your account for easy management. Just e-mail me, mjoffe@swfc.edu and I will be happy to help.

Here is one final tidbit for your consideration. The Department of Education is reaching out to student loan borrowers and they have added two trendy contact resources for borrowers. Check these out:
www.facebook.com/college.gov
The page features weekly tips, info and links for future, current and former students.
www.youtube.com/collegedotgov This site features more than 60 videos, inspirational videos from peers and advice from current college students.