Government Debt Consolidation Loans

In these trying financial days, people are asking for the government’s help with all types of issues. While the government is not designed, nor equipped, to bail individuals out of their own personal financial crises, it does make available funds to help certain people out of very specific debt situations. If you have an interest in finding out what government debt consolidation loan programs are available, you will want to keep reading.

There is only one area of debt that the government is interested in bailing individuals out of. Surprisingly enough, it is the area of student loans. You may be looking for help from the government in paying off your credit card debt or medical bills or helping pay your mortgage, but you won’t find it, at least not yet.

The only way to get a government debt consolidation loan is if you currently hold more than one unpaid student loan. 

The purpose of the government program that assists people with various student loans is to make those loans easier to pay back after college graduation. These consolidation loans will do two things. First, when you first took out that student loan, it was at a variable interest rate. It may have been capped as high as 9%, but the rate was designed to vary depending on the market situation. These government consolidation loans will set a fixed rate for your loan repayment. This means your payment will not fluctuate from month to month.

The second thing the government consolidation loan does is to put all your student loan payments into one easy monthly payment. When a number of payments can be consolidated into one payment at a fixed interest rate, the bill is more easily paid off because the guess work about the amount of interest and the number of payments to be made each month is eliminated. The government gets its money back on a more secure schedule, and your budget becomes more predictable.

There are four plans the government may employ in a debt consolidation loan for student loan expenses. The first is a standard plan. The interest rate will be determined by your credit score and the market conditions. The payment will be determined by the amount you owe and the length of the loan. It is a plan that is easy to understand with little flexibility.

The second plan is an extended payment plan. In this plan the interest rate is also determined by your credit score and the market situation. The payments may still be too high for you to manage on a standard time frame. The government may make this option available to you if your income and other expenses prohibit you from paying the debt back under the standard time frame.

A third option is the graduated payment plan. Under this plan, all your loans are consolidated into one payment. The smallest amount due, or the lowest interest rate loan, is paid off first. Once that debt has been paid, your monthly payment will be applied to the next highest balance, or next highest interest rate. As each loan is paid off, the payment is then applied to the next loan in sequence.

The fourth type of debt consolidation loan the government has available is the income contingent payment plan. Under this payment plan, the government will assess your financial health and your family size annually. After the assessment is made, your payments will be determined for that year. As your financial situation changes, or the size of your family changes, the government will make adjustments to your loan repayment schedule so it does not become overwhelming to you.

All these loan types are helpful for the student trying to repay what can be an overwhelming student loan debt.

If you are looking for government assistance in paying off credit card, mortgage, or other types of debt, you will not find it. If, however, you are looking for help in getting your student loans paid off with payments and interest you can handle, you need to look into a government debt consolidation loan. Contact your lender, whether private or government, and ask about the help that is available to you in managing your student loan debt.

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