If you have an FFEL loan and a Direct Loan, the US Department of Education wants you to consolidate. And as this presentation suggests, there are good reasons to do it
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Has the department of education asked you to consolidate your loans?
1. Helpful Financial Information from National Debt Relief …
Has The Department of
Education Asked You To
Consolidate Your Loans?
Did you recently receive a call or letter from
the US Department of Education (ED)? If
you have some type of federal loan, you
probably did — thanks to reforms recently
made to the Health Care and Education
Reconciliation Act.
$400 billion outstanding
Did you know that all federal loans are now
Direct Loans? This includes the $400
billion still outstanding in Federal Family
Education Loans (FFEL). (Continued …)
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2. Helpful Financial Information from National Debt Relief …
The problem with these loans is that they offer fewer options for repayment and are
unreasonably costly for taxpayers. Plus, there are about six million student loan
borrowers that have at one FFEL loan and a Direct Loan. This means they must keep
track of and make at least two different monthly payments — which, in turn, puts them at
a greater risk to default.
The ED wants you to onsolidate those loans
The ED is encouraging those of you that have two loans to move their guaranteed FFEL
loan into their Direct Loan. If you have split loans, this program actually requires you to
do nothing. In January of 2012 the ED began reaching out to borrowers that qualified to
let them know of this new opportunity so you may have already heard from the ED.
The consolidation initiative
This consolidation initiative will keep the conditions and terms of your loan identical —
except, of course, you’ll be required to make just one payment a month. If you take
advantage of this program you will also get a half of a percent reduction to the interest
rate on part of your loans, which could translate into reduced monthly payments and a
savings of hundreds of dollars in interest. Any FFEL loans you consolidate would have
their interest rates reduced by 0.25%, plus your entire consolidated FFEL and Direct
Loan balance would have an additional 0.25% interest rate reduction.
What this could mean
Here’s an example of what this could mean if you were to consolidate your FFEL loans
into a Direct Loan. Let’s assume you’re repaying two $4,500 FFEL Loans at 6% as well
as a $5,500 Direct Loan at 4.5%. If you repay those loans under Standard Repayment,
you will pay $4,330 in interest until you’ve paid off your loans in full. But if you were to
consolidate those FFEL loans into a Direct Loan, you would save $376 in interest
payments and would be required to make just one payment a month rather than two.
And here’s a more dramatic example. Let’s assume you are repaying a $32,000 FFEL
Consolidation loan at 6.25% and a Direct Unsubsidized Stafford loan at 6.8%. If you re
these loans under Standard Repayment you will pay a total of $13,211 in interest.
However, if you were to consolidate that FFEL loan you would save $964 in interest.
Struggling with your student loan debts?
If you’re struggling with your student loan debts, as are many Americans, there’s a free
online tool that could help. It’s called the Student Debt Repayment Assistant and is
available on the website of the Consumer Financial Protection Bureau (CFPB). This tool
will first ask you whether you have federal or private loans. If you have only federal
loans, it will next ask if you’ve ever missed one or more payments on your federal loan.
Assuming you haven’t, the tool will then ask whether or not you believe you can make
your full payments — considering your other living expenses. If you are struggling with
3. Helpful Financial Information from National Debt Relief …
your debts and answer, “no,” the Student Debt Repayment Assistant asks if you are on
active duty in the military. Answer “no” to this question and it will suggest that you move
to Income-based Repayment (IBR).
The benefits of IBR
If you choose to move to IBR (based on this tool), you would get several benefits. For
one thing, if you work in a profession where you have a moderate salary and a lot of debt,
and stay enrolled in IBR for 25 years, you could see any remaining balances cleared
(eliminated). Second, with IBR you can pay more if you want to, which would save on
interest and enable you to repay your loan faster. If you work in a public service job for
10 years, you could be eligible for loan forgiveness. But the most significant benefit of
IBR is that you’d probably have a much lower monthly payment - because your payments
would be based on your income, the state where you live, your debt load and the size of
your family.
Here’s an example of what this could mean. Let’s suppose you’re currently paying $208 a
month on a $20,000 student loan debt. If you were to move to IBR, had an income of
$30,000 a year and a family of three, your payment could drop to just $28 a month. You
read that right. Just $28 a month.
The disadvantages of IBR
You’ve probably heard that old adage that there’s no such thing as a free lunch. This is
definitely the case when it comes to IBR. It has two significant “prices” or disadvantages.
The first is that it will take you much longer to pay off your loan — probably 30 years vs.
10 years in Standard Repayment — and you’ll pay more in interest. But if you’re having
a tough time repaying your student loans you might be better off switching to IBR to get
that lower monthly payment even if it means it will take you a lot longer to repay your
loan.
Would you really be eligible for IBR?
If you used the Student Debt Repayment Assistant and were told you would qualify for
Income-based Repayment it’s important to understand that this may not be the case.
While the Student Debt Repayment Assistant tool can be helpful, you may not be eligible
for IBR despite what it says. The reason for this is because to qualify you must show you
have a partial financial hardship. The way this is defined is that the monthly payment
you’re currently making under a 10-year Standard Repayment Plan needs to be higher
than what you would pay monthly under IBR.
Even lower monthly payments
If you have newer loans you might be eligible for the Pay As You Earn (PAYE)
repayment program that offers even lower monthly payments than the IBR program.
4. Helpful Financial Information from National Debt Relief …
Still more options
In addition to IBR and PAYE, there are Income-Contingent Repayment and Graduated
Repayment. While all of these plans have many things in common, they do have different
eligibility requirements and provide different levels of debt relief.
Finding the best program
As you have read there are a number of ways to deal with student loan debts, plus others
such as loan deferment and cancellation that we haven’t covered. Fortunately, there is a
simpler way to determine which of these programs would be best for you. The company
National Debt Relief recently introduced a consulting program where it will match your
situation to the best student debt elimination program given your financial situation. In
addition, National Debt Relief will do all the paperwork required to get you into that new
program. There is just a flat, one-time fee for this service, which is deposited into an
escrow account. National Debt Relief will not withdraw its fee from this account until
you have approved both your paperwork and its recommended student debt relief
program. If you don’t like the program National Debt Relief recommended or are
unsatisfied with your paperwork, your money will be returned and you will pay nothing.
5. Helpful Financial Information from National Debt Relief …
Does this sound familiar?
• You are tired of worrying about money…
• You are losing sleep due to mounting credit
card debt…
• You are fighting with your partner about the
bills…
• You are living paycheck to paycheck…
• You are falling behind on your debts…
• You are losing hope…
It’s time to talk with National Debt Relief!
1-888-275-4499
Or Go To
http://www.nationaldebtrelief.com/free-
student-loans-quote-now/?src=PDFs