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Private versus Federal Consolidation Loans – What’s the Difference?  by: Vanessa McHooley A consolidation loan lets you combine your federal student loans into a single loan with one monthly payment. There are two programs available for consolidating student loans: The Federal Family Education Loan (FFEL) Program, through which banks, secondary markets, credit unions, and other lenders provide the consolidation loan The William D. Ford Federal Direct Loan (Direct Loan) Program, through which the federal government provides the consolidation loan There are several differences between these programs, as outlined in the table below: FFEL Program Lenders - Banks, secondary markets, and credit unions Loans accepted - Can accept all eligible loans from eligible borrowers, but are not required. Repayment Plans- Offers four repayment plans Standard Repayment Plan Graduated Repayment Plan Extended Repayment Plan Income - Sensitive Repayment Plan (in which the monthly payment amount is set according to the borrower's income and loan debt) Timing of consolidation Borrowers can consolidate after they have left school and all of their loans are in grace or repayment. Direct Loan Program Lenders - Federal government Loans accepted - Must accept all eligible loans from eligible borrowers Repayment Plans - Offers four repayment plans Standard Repayment Plan Graduated Repayment Plan Extended Repayment Plan Income - Contingent Repayment Plan (in which the monthly payment amount is set according to the borrower's income, family size, and loan debt) Timing of consolidation Borrowers can consolidate while they are still in school. In other ways, the two loan programs are similar: They both have options to allow borrowers who have defaulted on their loans to consolidate those loans. In general, neither of them charges prepayment penalties or origination fees, nor are credit checks or co-signers required. However, some private lenders may charge processing fees. The base interest rate on your consolidation loan is the same regardless of the lender. However, private lenders may offer additional incentives such as a reduced rate if you make your payment on time and if you have your payment automatically debited from your bank account. Keep in mind that if all of your loans are through one lender, that lender has the first option to consolidate the loans. Only if that lender declines can you go elsewhere. This article is distributed by NextStudent. At NextStudent, we believe that getting an education is the best investment you can make, and we're dedicated to helping you pursue your education dreams by making college funding as easy as possible. We invite you to learn more about Private Consolidation Loans or Federal Consolidation Loans at http://www.NextStudent.com. About The Author My goal is to help every student succeed - education is one of the most important things a person can have, so I have made it my personal mission to help every student pay for their education. Aside from that, I am just a pretty average girl from SD. This article was posted on February 23, 2005 Read More Articles from the "Writing" Category: 7 Steps to Writing Effective Cover Letters by Robert Moment Essay Types and Modes You'll Need to Write for College by Roxanne McDonald Does Your Plot Suit Your Characters And Vice-Versa? by Nick Vernon The Title That Hooked The Most Readers by Steve Gillman How To Use The Flesch Grade Level Readability Formula To Write For Your Audience by Jesse Dawson Top 10 Ways to Know your Book Concept will Sell--Before you Invest Time and Money by Judy Cullins Top Nine Essential "Hot-Selling Points" To Pre-Market your Book for Big Sales by Judy Cullins For Beginners: 10 Ways To Prepare To Get Published by Jill Nagle Great Technical Writing: Beware Of Your Editor/Love Your Editor by Barry Millman 5 Questions to ask before purchasing a book online by Anand Srinivasan << Back to "Writing" Index

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