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Direct Loan Consolidation and the FFEL Program - Differences

Updated on October 11, 2011

Student Loan Consolidating - Differences between programs

With Student Loan Consolidation, there are a couple different options at least and it is good to know the differences between the two. So what are the differences between the FFEL program and direct consolidation? FFEL stands for Federal Family Education Loan, for those that are not familiar or may have forgotten.

The FFEL program involves bank based loans for students. The direct consolidation loans are made through the Department of Education. You can look at the Department of Education's website to learn more, and I will post a link below as well. Knowing what the differences are to look for can be helpful to a student or past student that wants to save money by consolidating a few different loans together.

Some things to look for include:

1. The types of loans that can be consolidated.

2. It may be a requirement that you have a prior account relationship with them.

3. There are minimums involved, like the number of loans required or minimum balances required.

4. There are differences in repayment plans offered. There may be payments that take into consideration the income of the borrower, one's family size, and the total of debt that has been accumulated for school debt.

For people struggling with credit that isn't the best, you might need to go with a loan consolidation through the FFEL program. This is because with the FFEL program, you do not need a credit check, not even for PLUS borrowers. PLUS borrowers are typically parents that have taken out loans for their kids in college.

For those that have a a direct loan consolidation, the parents in an PLUS borrowing scenario will likely have to do a credit check. They are wanting to rule out a negative credit history.

Before you make the decision of which to go with, look into an online calculator. This can help to know what your consolidated loan will cost in the long haul. That is something that people may not want to know, but you need to know it all the same.

Do your Homework

Most of all, do your homework and learn as much as you possibly can as it can save you time and money. Learn about how the lenders will handle your loan consolidation. Ask each of them what special things they have to offer. Are there any special benefits of going with them in particular? The goal is to end up in an situation you can handle with your student loans, whether or not they are consolidated. Getting out from under that debt as fast as you can would be the best tip given by many. Be careful that you don't fall for the temptation to spread the loan out too much.


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    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Thank you very much Phoenix.

    • PhoenixV profile image

      PhoenixV 6 years ago from USA

      Great information and well written hub.