CONSOLIDATED LOANS IN AMERICA

Private lenders once played a larger role in the student loan market than they do today. In the past, students submitted the Free Application for Federal Student Aid (FAFSA), to the Department of Education, before being referred to private lenders for loan fulfillment. In other words; the Federal Government would determine your eligibility for subsidized loans, and then a private credit union, bank or loan servicer would provide the funds.

Debt is a way of life for Americans, with overall U.S. household debt increasing by 11% in the past decade. Today, the average household with credit card debt has balances totaling $16,748, and the average household with any kind of debt owes $134,643, including mortgages.

While “don’t spend above your means” will always be sound advice, NerdWallet’s annual survey of household debt and its costs makes clear that increasing debt loads aren’t just a case of lifestyle creep. The rapid growth in medical and housing costs is dwarfing income growth, making it challenging for many families to make ends meet without leaning on credit cards and loans.

But this doesn’t mean Americans are doomed to be indebted for life. Careful spending and steady debt eradication can go a long way toward getting people to financial freedom.Bank of America was active in that market, providing financing for participants in the Federal Family Education Loan Program (FFELP). Stafford Loans, and other government-subsidized initiatives, including consolidation loans, were among BOA’s stable of student assistance programs. Today, regional and national banks extend attractive private student loan products, but they are no longer included in the federal financial aid process.Educatioon Reconciliation Act of 2010 made fundamental changes in the way student loans are administered. Subsidies for banks that gave student loans were eliminated, and the student loan program took on a self-funded model. By cutting out the middleman – the private lender – the Department of Education administers funding with greater efficiency, thus expanding educational opportunity among borrowers.

All loans issued after July 1st, 2010 are part of the William D. Ford Federal Direct Loan Program, which distributes aid directly from the DOE. Federal Loan Consolidation remains an option for students, and BOA does offer a portfolio of student-oriented financial services that meet a variety of educational needs.

Pre-Consolidation Considerations:-Loan consolidation allows students to package existing educational debt into a single government loan. If you have multiple outstanding federal student loans, including Stafford, Perkins and PLUS Loans, it might make fiscal sense for you to utilize consolidation. But participation does not always guarantee a rosier outlook. Some candidates are better off sticking with the status quo. Ask these questions to help determine whether or not consolidating is your best option:[read more..]

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