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In the United States the Federal Direct Student Loan Program (FDLP) accommodate alliance loans that acquiesce acceptance to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one distinct debt. This after-effects in bargain account repayments and a best appellation for the loan. Unlike the added loans, alliance loans accept a anchored absorption amount for the activity of the loan.
Interest rates and payments.

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10-30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.[3][2]
[edit]History

The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).[3][4]
In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs.[1] In 2008, turmoil in the financial and credit markets has led to the suspension of many loan consolidation programs, including Sallie Mae, Nelnet and Next Student.
[edit]References

^ a b "GAO-06-195 Highlights, STUDENT CONSOLIDATION LOANS: Potential Effects of Making Fiscal Year 2006 Consolidation Loans Exclusively through the Direct Loan Program" (PDF). U.S. Government Accountability Office. 2005-12-01.
^ a b "Frequently Asked Questions About Consolidation Loans". Washington State University Office of Student Financial Aid. 2006-06-09.
^ a b c Potier, Beth (2004-02-05). "Amid the hype, opportunity lurks for students with loans.". Harvard Gazette.
^ "Types of Student Aid: Consolidation Loans". Student Guide 2001-2002. United States Department of Education.

Income Based Repayment

The Income Based Repayment plan is an alternative to paying back student loans, which allow the borrower to pay back the loan based on how much he/she makes, and not based how much money is actually owed.[3]
[edit]Qualification
Most college students in the United States qualify for some type of student loan, although the amount they can borrow may vary based on several factors. Income level, parents' income level, and other financial considerations are all weighed to determine the amount they are eligible to borrow under the federal student loan program.

Repayment
A student loan has major differences over conventional loans - 6% interest rates (higher than most home loans) and inability to negotiate. The interest rate on a student loan will generally be at least two percentage points lower than the going market rate for conventional loans, but this will vary somewhat.
Repayment typically begins anywhere from six to twelve months after a student leaves school, regardless of whether or not they complete their degree program. In some cases, repayment begins if course load drops to half time or less, so it is important to check the exact terms and conditions of any student loan.

The student may have multiple options for extending the repayment period, although an extension of the loan term will likely reduce the monthly payment, it will also increase the amount of total interest paid on the principle balance during the life of the loan. Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income sensitive repayment plans and hardship deferments. Extensions and consolidation will also add to the principal, many times unpaid interest and penalties become capitalized.

The Master Promissory Note is an agreement between the lender and the borrower that promises to repay the loan. It is a binding legal contract. Direct student loans can be obtained by filling out the government FAFSA form, and each school will determine eligibility of a student for direct federal loans.

A man at the Occupy Wall Street event in New York protesting student loan debt, September 19, 2011
In coverage through established media outlets, many borrowers have expressed feelings of victimization by the student loan corporations.[4][5][6] There is a comparison between these accounts and the college credit card trend in America during the 2000s, though the amounts owed by students on their student loans are almost always higher than the amount owed on credit cards.[7] Many anecdotal accounts of the hardships caused by excessive student loan debt levels are chronicled by the organization Student Loan Justice which is founded and led by consumer rights advocate and author, Alan Collinge.[8]

The legislation which covers repayment of student loans is 11 U.S.C. § 523. This legislation directs that student loans are not discharged in any bankruptcy proceeding unless the bankrupt can demonstrate "undue hardship" which is left to the sole discretion of the particular judge hearing the case.[9] There are many documented cases of Americans committing extreme actions because of large student loan balances. This seems particularly true in the case of private loan balances.[10] After the passage of the bankruptcy reform bill of 2005, even private student loans are not discharged during bankruptcy. This provided a credit risk free loan for the lender, averaging 7 percent a year.[11]
In 2007, the Attorney General of New York State, Andrew Cuomo, led an investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with "kick backs." This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers.[12][13]

The biggest lenders, Sallie Mae and Nelnet, are frequently criticized by borrowers. Despite the fact that Representative and Speaker of the U.S. House John Boehner is one of their biggest political allies,[14] these lenders often find themselves embroiled in lawsuits, the most serious of which was filed in 2007. The False Claims Suit was filed on behalf of the federal government by former Department of Education researcher, Dr. Jon Oberg, against Sallie Mae, Nelnet, and other lenders. Oberg argued that the lenders overcharged the U.S. Government and defrauded taxpayers of millions and millions of dollars. In August 2010, Nelnet settled the lawsuit and paid $55 million.[15]

The New York Times recently published an editorial endorsing the return of bankruptcy protections for private student loans in response to the economic downturn and universally increasing tuition at all colleges and graduate institutions.[16]