Is consolidating your credit a good idea

WARNING: It is very dangerous to consolidate federal loans into a private consolidation loan.

You will lose your rights under the federal loan programs once you choose to consolidate with a private lender.

The Department strongly encourages borrowers to apply on-line, but you may also download and print a paper application to submit by regular mail. Prior to July 1, 2006, married borrowers could choose to consolidate federal student loans from both spouses or jointly consolidate the loans of either spouse.

The Department provides the following contact information if you have questions: If necessary, you can also try calling the general Student Loan Support Center at 1-800-557-7394. Both borrowers had to agree to be jointly and severally liable for repayment.

Using Studentloans.gov: You will need to sign in using your personal identifiers and PIN. You are required to select from the choices listed by the Department of Education). (“Joint and several liability” means that both borrowers are fully liable for the full amount of the debt). Not surprisingly, this caused a lot of problems for borrowers and Congress eliminated the program as of July 1, 2006.

The electronic application consists of five steps: 1. If may make this choice on-line or if you are sending in a paper application, you should send directly to the servicer you choose. The Department provides some general information about servicer performance in the on-line data center and quarterly performance reports. There are still many borrowers struggling with joint consolidation loans.

This may lead to a lower interest rate on a Direct Consolidation loan, but only if you are consolidating variable rate loans. You will generally receive your first bills within 60 days after the new Direct Consolidation loan is made.

Loans that are not eligible for consolidation include state or private loans that are not federally guaranteed.

Although all of these different loans may be consolidated, you must have at least one outstanding FFEL or Direct Loan to obtain a Direct Consolidation Loan.

Borrowers in default may also consolidate in certain circumstances.

Consolidation was previously available to borrowers while they were still in school. Congress also eliminated joint consolidation for spouses, effective July 1, 2006.

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