Department of education consolidating federal loans
Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a ,100 million saving comprised in part of avoiding ,500 million in subsidy costs.
In 2008, turmoil in the financial and credit markets has led to the suspension of many loan consolidation programs, including Sallie Mae, Nelnet and Next Student.
Loan consolidation is a practical and useful tool that can bundle all your student loans into one loan which makes it easier for you to apply for you loan and could increase your chances of getting approved.
In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds).
Note: Many of our articles have direct quotes from sources you can cite, within the Wikipedia article! This results in reduced monthly repayments and a longer term for the loan.
In the United States both the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP) include consolidation loans that allow students to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt.
Under these programs, the United States Department of Education acts as the lender for qualified college students looking to finance their education.
The Federal Loan Consolidation Program was created in 1986.
In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999.
Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).
In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP.
This will result in an increase in the overall cost of a student’s outstanding education loans.