Though the loan consolidation process and its terminology can be complex and confusing, the basic concept is easy to understand: You take all of your outstanding federal student loans (even if it’s just one loan) and bundle them into one new student loan with one monthly payment. The new rate is fixed—meaning it won’t change—and the length of the loan can be extended all the way up to 30 years, which can lower the amount of your monthly payments. It’s a kind of refinancing of your federal student loans.
Student loan consolidation has grown significantly during the last several years. Students and their families have had to take on more financial burden due to a combination of steep increases in tuition (annual costs rose 35 percent during the last five years) as well as a decline in the amount of federal and state financial aid, including grants, to students. Put another way, this new era is being called “debt for diploma.” In turn, loan consolidation has become such a viable and necessary option that some 2.5 million students consolidated their loans in 2005. The U.S. Department of Education predicts that nearly as many students will do the same in 2006.
Student loan consolidation has grown significantly during the last several years. Students and their families have had to take on more financial burden due to a combination of steep increases in tuition (annual costs rose 35 percent during the last five years) as well as a decline in the amount of federal and state financial aid, including grants, to students. Put another way, this new era is being called “debt for diploma.” In turn, loan consolidation has become such a viable and necessary option that some 2.5 million students consolidated their loans in 2005. The U.S. Department of Education predicts that nearly as many students will do the same in 2006.
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