What are the advantages and disadvantages of consolidated Federal loans for students?

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WASHINGTON – The Federal program for student loan consolidation was established in 1992 under George H.W. Bush and it is an important part of the Higher Education Act. Ever since it was created, the program had great success among students who couldn’t afford to pay for their studies otherwise, but in 2010 Barack Obama made some notable changes. Apart from the fact that the Government can still consolidate student loans, he introduced the so-called Obama Student Loan Forgiveness program, meaning that, according to the law, in some special cases, debts can be cancelled. Also, students can receive support for paying their running balance.

In many cases, people could consider that consolidating their student loans with the Government’s support is an opportunity to solve a part of their problems. However, we are living in an unstable society and many factors can have a negative influence on our daily lives. This instability can determine a person to give up on the idea of applying for a consolidated student loan – if you lose your job, you would find yourself in the impossibility of paying the loan back.

Advantages and disadvantages of consolidated student loans


  • The repayment process is a lot easier because you have to make only one payment every month;
  • Flexible payments: you can adjust the monthly remittances according to the changes in your life, the size of your family and your income. This means that if you cannot pay your monthly rate at due date, you won’t be charged extra;
  • In special cases, the Government can cancel some unpaid balances;
  • You can have a fresh start. The loan will bring a different note and energy in your life, so it will motivate you to do what you can to improve your life;
  • Even if you want a consolidation for your student loan, you should know that other types of credit can be refinanced. In order to be eligible, they have to be included in the REPAYE system;


  • The interest rate could increase. Unlike other financial institutions, the Government can add approximately 0.125% to your debt;
  • The contract term could be longer; it all depends on the total number of years estimated for covering the whole loan. For example, sums under $7,500 and reaching $19,999 could be paid in 10-15 years, while amounts between $20,000 and $60,000 could be covered in 20-30 years. A long contract is not always a good idea, because many things can change in a long period of time
  • During long contracts, the capacity to pay off might decrease; the interest rate depends on how many years your contract will be valid. If the time is too long, the interest will be very high.

In any case, consolidated Federal student loans are a good solution on short and middle term. Look for more information and decide if they can work for you as well.

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