What To Know About Government Debt Consolidation Loans

Government debt consolidation loan is an alternative for people who owe money to different organizations and  institutions. The loan helps to combine your debt into a single monthly payment that is easy for you to meet. The interest is always lower than conventional debt consolidation loans. This is especially true for students. The government stand as guarantor for the loans, hence they are refereed to as secured loans.

The most frequent beneficiary of government debt consolidation loans are college students. The program is targeted at students who are unable to pay back debts owed in different forms. This include credit card debt, medical bills and students loans. The low interest rate helps student to pay off their debt and become debt free in a shorter period of time

The government works with the Federal Family Education Loan (FEEL) which falls under the Higher Education Act. The loans are granted through the FEEL. The debt owed by the student could be from different institutions with different interest rates and payment terms. All the loans are then consolidated into a single monthly payment with lower interest rate. Another organization the government work with is the Direct Loan Program.

The government debt consolidation loan offers four different plans. These are the extended payment, standard plan, graduated payment plan, and income contingent repayment (ICR) plan. The students are placed on the plan that is most appropriate for their financial circumstance at the time they apply for the loan.

The extended payment plan increases the payback time and decreases monthly payments. The standard plan comes with a consistent monthly payment throughout the duration of the loan. The graduated payment starts with low monthly payments that increases gradually. The income contingent plan is dependent on the student's income as of the time of loan application.

The government debt consolidation loan has the advantage of being very reliable. It has been used by a lot of borrowers. It is reliable because it is backed by the government.