A student loan consolidation makes repayment seem more manageable because you only have one loan and one payment. You also have other ways for consolidating student loans such as a direct consolidation loan that offers many repayment options depending on your finances.
You can consolidate your student loan directly with the US Department of Education through a direct consolidation loan. They offer a number of payment options for you to choose.
If you need the flexibility to change your payment plan due to changes in your financial situation, the direct consolidation loan is what you need. It is designed for just his purpose.
Another repayment plan is called the standard repayment plan. With this plan you will settle on a fixed monthly amount until you have paid the balance in full. Your monthly payments can start out as low as $50.00 per month for 30 years depending on the amount you owe.
The extended repayment plan goes up to 25 years but to be eligible you have to have a loan amount that is more than $30,000. You can have a fixed monthly payment of $50 until you have paid off the whole loan or pay the interest first and settle the remaining amount later. For the latter option, your payment will start out very low and will increase every two years.
The income contingent repayment option determines your monthly payment based on your annual income, balance owed and the size of your family. The loan term may be extended for up to 25 years.
The direct consolidation loan does not have specific requirements for you to qualify, and there is no fee. You only have one lender to deal with which is the U.S. Education Department.
You now have all the information you need to know about the direct consolidation loan payment options. This should help you make a more informed decision about the program and let you compare with other consolidation loan programs that are available.
By: Ryan Wilkins
Posts Tagged ‘Income Contingent Repayment’
Student Loan Consolidation – The Long and Short of Consolidation Plans
December 6th, 2009
With tuition increasing at a rate greater than the cost of living, college students are depending more and more on student loans to help with the costs of higher education. Over the course of four or five years or longer in the case of graduate students, this adds up to many loans. Whether the loans are from the same lender or program or from different lenders and programs, most student loans can be consolidated under the Federal Direct Consolidation Loan. Consolidating your student loans can occur at any time after you take out your first student loan. The benefits, at least at the moment, are that you only pay one lender and there are several repayment plans to accommodate your financial situation.
Federal Student Loan Consolidation Plans
There are 4 consolidation loan repayment plans with fixed interest rates to choose from:
* Standard Repayment Plan:
The Standard repayment plan takes the shortest amount of time to repay. The interest is fixed and the monthly payments are fixed at a minimum of $50 for a maximum of 10 years.
* Extended Repayment Plan:
Under this plan the borrower pays fixed monthly payments that are less than the Standard plan. The repayment period can range anywhere from 12 to 30 years depending on the total amount borrowed. While the monthly payments are less, the total amount repaid is greater than the Standard plan because more interest accrues.
* Graduated Repayment Plan:
Another option that might work well for those who expect their income to increase gradually over time is the Graduated Repayment Plan. Rather than a fixed monthly payment for the duration of repayment, monthly payments increase every two years. Similar to the Extended plan, the repayment period varies from 12 to 30 years depending on the total amount borrowed
* Income Contingent Repayment Plan (ICR):
The Income Contingent Plan is more flexible than the other 3 plans because it considers the borrower’s adjusted gross income, family size and the total amount borrowed when calculating monthly payments. The repayment period is a maximum of
25 years. Any unpaid portion of the loan at that time is discharged, but taxes must be paid on the discharged amount.
When choosing a plan, consider your financial situation and what it might look like in the future. Paying off your student loans sooner may be the best option for you, but you may have other financial considerations to make and need to keep more of your hard earned money for your current living expenses. Whatever the case may be, look at each plan carefully and consider how it will affect you now and in the future.
By: Peter Livingston
Government Debt Consolidation Loans
November 18th, 2009
Government debt consolidation loans are loans offered through various government programs to pay off multiple loans. This enables an individual to take care of one single monthly payment compared to 3 or 4 payments to different creditors. This is the principle of debt consolidation. Debt consolidation also helps by lowering the interest rate by switching from unsecured debt to secured debt.
The federal government has various programs that help particularly students in debt to consolidate their loans to quickly reduce and eliminate their debt. Students typically have student loans, credit card debt, and medical bills that keep them in a state of high debt. The Department of Education pays off the original federal education loans and issues a new loan for the consolidated amount of the old loans. This is done as part of the Direct Consolidation Loan Program.
The Federal Family Education Loan (FFEL) Programs and the Direct Loan Program are programs that fall under the Higher Education Act (HEA) and allow loan consolidation. This works by issuing a new consolidation loan to the borrower that pays off the borrower’s existing loans. The borrower might have contracted the existing loans from various lending agencies, which have different terms, repayment dates and arrangements. Paying off these multiple loans with one loan and making a single monthly payment helps individuals effect timely payments at a lower interest rate. With a consolidated loan, the monthly payment amount is generally lower. Moreover, there is increased clarity as to the total term of payback, the exact interest rate charged, and the payment due date. In most cases the payback term can be increased to ease the payoff process and reduce the monthly commitments.
The government debt consolidation loan program has four plans for the borrower – standard plan, extended payment plan, graduated payment plan, and income contingent repayment (ICR) plan. Each of these plans has features that suit the situation of a borrower, thus providing the flexibility required of a debt consolidation and elimination program.
By: Jennifer Bailey