Student Loans Driving You Crazy? Consolidate Them With The Federal
Direct Loan Program Because:
* you can pay based on your income.
* you'll have more repayment choices than ever before.
* you can change your repayment plan at any time.
* you get everything on one monthlystatement.
* you can qualify even if you're in default.
* you can qualify even if you're still in school.
YOU CAN PAY LESS EACH MONTH.
Regardless of how many federal student loans you're repaying, you may
benefit from consolidating them into a single account.
Any borrower with one or more FFEL or Direct student loans, including
parents with PLUS Loans, can consolidate these loans into a Direct Loan
account.* A consolidation loan combines favorable repayment terms,
convenience, financial flexibility and competitive interest rates. By
giving you the option to repay over a longer period of time,
consolidation may cut your monthly payments substantially although
extending the years of repayment increases the total amount you will
repay.
Interest rates for a Direct Consolidation Loan are variable and adjusted
on July lst of each year The interest rate for student borrowers will
never be higher than 8.25 percent; for parents with PLUS loans, never
higher than 9 percent.
* If you don't have a Direct Loan now, you are required to check with a
Federal Family Education Loan (FFEL) Program lender for information
about consolidation programs and about setting up new repayment terms
that are sensitive to your income.
You must consolidate at least one loan made under the Direct Loan or
FFEL Programs.
Before You Decide-Here are some factors you should consider when
deciding if consolidation is right for you.
* The interest rates for each loan-If a Direct Consolidation Loan offers
you a lower rate than your current loans, you may want to consolidate.
The interest rate is variable and may go up or down, but it cannot go
higher than 8.25 percent for students or 9 percent for parents with PLUS
Loans.
* What you can afford to pay each month -If you are having trouble
meeting your monthly payments, have exhausted your deferment and
forbearance options, and want to avoid default, consolidation may help
you ease the burden.
* How much you're willing to pay over the long term-Like a home mortgage
or a car loan, extending the years of repayment increases the total
amount you have to repay.
* How many payments you have left on your loans -If you are close to
paying off your student loans, it may not be worth the effort to
consolidate or further extend your payments.
* What your current lenders offer-Check with the lenders currently
holding your loans to see if they can offer terms and repayment plans
that meet your needs better than a Direct Consolidation Loan can.
YOU CAN PAY BASED ON YOUR INCOME
Only Direct Loans offer an Income Contingent Repayment Plan designed to
adjust automatically to fit your ability to pay; this is based on your
income. (Note: This plan is not available for PLUS Loans.) This plan can
give you the freedom to pursue your chosen career, even when that means
accepting lower-paying employment of particular interest to you.
Because payments will be proportionate to your income, the Income
Contingent Repayment Plan can also meet the financial needs of
entrepreneurs starting businesses.
The Income Contingent Repayment Plan is one of four payment plans listed
on the next page. In consolidating your loans with a Direct Loan
account, you can select the plan that best fits your financial needs now
and change whenever your circumstances change. Although you pay more
total interest over the life of the loan when you make lower monthly
payments, you can switch at any time to a more rapid payment plan when
you can afford to pay more.
"The Income Contingent Plan would allow me the flexibility to choose the
career that I want. Iwon't have to worry if my salary will be enough to
cover my loan payments; now my loan payments will automatically be
geared to my income." -- Michelle Morales, Student
YOU'LL HAVE MORE REPAYMENT CHOICES THAN BEFORE
Choose the repayment plan that is right for you. Each individual's
career plans and financial goals are different. But Direct Loans are
designed to help you tailor a repayment plan that fits your financial
situation. Although you accumulate more interest charges under options
that offer lower monthly payments, you can change to a more rapid
repayment plan or prepay without penalty whenever you're able to do so.
The repayment plans include:
1. Standard Repayment Plan-fixed payments over a term of 10 years or
less. The monthly payment is somewhat higher than the beginning
payments of other plans, but it's the fastest way to repay a Direct
Loan, with lower overall charges.
2. Extended Repayment Plan-lower monthly payments (than the 10-year
plan) over a relatively long (12- to 30-year) term, depending upon the
amount you owe. The longer term permits a smaller monthly payment.
3. Graduated Repayment Plan -payments that rise gradually in two-year
steps over a fixed term of 12 to 30 years (depending on the amount you
owe), so you can repay more as you earn more.
4. Income Contingent Repayment Plan-payments that are linked to the
borrower's income; the term is up to 25 years. This unique plan is
especially appropriate for persons interested in community service and
other careers that may have low starting salaries.
Once you select your repayment plan, you can choose how you want to pay
each month. Our Servicing Center can notify you of payments due by
monthly statements, or you can request a coupon book.
"With the money we're making now, we'll be able to pay off ourloans
quickly and economically with the Standard Plan. But we can also switch
later if we need to pay more slowly. Having a Direct Loan account gives
us the flexibility to plan for our financial future right from the
start" -- Sebastian Ruta, Computer Systems Aministrator, and Jyoti
Vaswani, Investment Banker
YOU CAN CHANGE YOUR PLAN AT ANY TIME.
Choose a different repayment plan if your needs change. Your life
changes, and so can your finances. By consolidating with the Direct
Loan Program, you can choose the right repayment plan now and then
change your repayment plan to fit your developing career. With a Direct
Loan, you can switch your repayment plan whenever your financial
situation changes.
"When I graduate next semester, I'll need to consolidate my graduate and
undergraduate loans. I have chosen a public service career, and the low
salary will make it very difficult to make monthly payments unless I can
pay smaller amounts in the beginning. With the Graduated Repayment Plan
I can repay my loan without going broke. Then when my career gets
going, I can choose a different plan and pay it off faster" -- John
Woods, EEOC Investigator
YOU GET EVERYTHING ON ONE STATEMENT
See all the information you need to take control of your loans. When you
consolidate your loans into a Direct Loan account, there is just one
billing statement each month; a single Servicing Center instead of a
complex network of private lenders and their services Even applying is
streamlined and hassle-free, with just one application to fill out and
step-by-step assistance just a phone call away (1-800-557-7392). That
means:
Better control. With all your present student loans consolidated as a
single loan account on one statement, with one balance and one monthly
payment, keeping track of your loan status is easier-an aid in keeping
your financial life under control.
Better service. If questions do arise about your loan account, or if
you want to change your repayment plan-call just one phone number to
reach the help you need.
"With a career in the arts, nothing is certain -least of all, your
income. Budgeting and financial planning can be almost impossible.
That's why I like the idea of being able to change my repayment plans
with a Direct Consolidation Loan to fit the way my career is going It's
flexible like my work." -- Tim Hussey, Actor Illustrator
ATTENTION:STUDENTS -- CONSOLIDATE WHILE YOU'RE IN SCHOOL
If you are attending school at least half time, have a Direct Loan or
are attending a Direct Loan school and have at least one Direct Loan or
Federal Family Education Loan (FFEL) in an "in-school" period, you are
eligible for in-school consolidation, and it can make your life easier.
You can benefit from Direct Loan Consolidation if you have not yet
entered repayment on your student loans or you have entered repayment
but have now returned to school.
There's just one number to call to change your address or student
status, or request deferment forms. The variable interest rate will
never exceed 8.25 percent and may be lower during in-school, grace and
deferment periods. There is never a penalty for early payoff of your
loan, and no minimum or maximum amount you must consolidate.
For more information about in-school consolidation, call 1-800-557-7392.
A WORD ABOUT DEFAULT
If you are in default, you may still consolidate your loans; however,
your credit report will show a paid-in-full default entry Consolidation
will limit further collection costs and will allow you to pay off your
defaulted loan with the lowest possible payment.
If you want to eliminate the default notation from your credit record,
you may want to consider another option -what we call "loan
rehabilitation." You can "rehabilitate" your loan(s) by making 12
consecutive payments to the lender(s) currently holding your defaulted
loan(s). You need to contact them to determine a reasonable and
affordable payment amount.
If you are in default and would like more information, call 1-800-621-
3115.
EXAMPLES OF HOW A DIRECT LOAN CAN WORK FOR YOU
Individual A income $25,000 debt $10,000 at 8.25%'
total
first max. term in amount
payment payment months repaid
standard 122.65 122.65 120 14,718
extended 97.01 97.01 180 17,463
graduated 70.07 158.86 180 19,085
income contingent* 109.62 109.62 144 15,785
Individual B income $10,000 debt $3,500 at 8.25%'
total
first max. term in amount
payment payment months repaid
standard 50.00 50.00 96 4,790
extended 50.00 50.00 96 4,790
graduated 25.00 63.58 144 6,037
income contingent* 37.50 38.37 145 5,541
Individual C income $50,000 debt $50,000 at 8.25%'
total
first max. term in amount
payment payment months repaid
standard 613.36 613.36 120 73,592
extended 394.23 394.23 300 118,268
graduated 350.34 502.50 300 125,708
income contingent* 548.10 548.10 144 78,927
Individual D income $30,000 debt $50,000 at 8.25%
total
first max. term in amount
payment payment months
standard 613.26 613.26 120 73,592
extended 394.23 394.20 300 118,268
graduated 350.34 502.50 300 125,708
income contingent* 345.00 548.10 207 99,898
18.25% is the maximum interest rate for student borrowers.
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Excerpted from U.S. Gov't Material
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