In simple terms, a government debt consolidation loan is a government issued loan given to an individual to help pay off debts owed to several different institutions. The idea is that it is easier for the debtor to pay down their debt by making one payment to one organization rather than trying to juggle multiple payments all due at different times to different companies. Also, interest rates on government debt consolidation loans tend to be lower since they are secured loans.
The most common use of a government debt consolidation loan is that of a student paying off student loan debt. Since most students do not have high credit scores, this loan can often help them get out from under the burden of high interest loans much quicker.
When an individual applies for and receives this type of debt consolidation loan, the government pays off all creditors and issues a new loan to the individual in the same amount, but at a much lower interest rate. The actual amount owed doesn’t change, but the monthly payment is significantly less due to the reduced interest rate of the new loan.
The federal government runs various types of programs to help students pay off debt accumulated via student loans, credit cards and medical bills. The department of education often settles the original education loan and opens a new loan comprised of all debts. This is known as the Direct Consolidation Loan Program.
The Higher Education Act consists of two loan programs. The direct consolidation program and the family education loan program. Both of these offer the option of debt consolidation. Under both plans, the student is offered the chance to consolidation all their debt to pay off their student loans. In most cases, in addition to a reduced interest rate, you can also extend the length of your loan so you can pay less over a longer period of time.
Students are not the only people who can benefit from government debt consolidation loans. There are a number of loans available to assist homeowners who have suffered a financial setback. Owners of homes in certified disaster areas are able to receive loans sponsored by FEMA and the SBA. In addition, homeowners at risk of foreclosure might qualify for a new FHA program called Hope For Homeowners. Under Hope For Homeowners, lenders would agree to take significantly less money for the home in order to avoid the costly process of foreclosing on a property. When a person is deemed financially unable to meet the terms of their current mortgage, the bank would agree that making some money back is better than making no money back on the loan.
Farmers and veterans who are feeling the strain of these tough economic times may also qualify for government debt relief. Farmers may qualify for loans through the Farm Service Agency and veterans can always contact the VA for information on home equity loans, refinancing and loans against their current life insurance policies. All of these options can be used to consolidate existing debt and make it far easier to manage the payments.
Finally, while not used for debt consolidation, those who find themselves newly unemployed can take advantage of a host of education loan options. If you are looking to transition into the health care field, there are several government assisted education grants to do just that. Those looking to become nurses can take advantage of several education assistance programs designed to target the severe shortage of professionals in that particular field.
With a little bit of research, it’s easy to find information on the many government debt consolidation and education assistance plans available. It’s important to remember that the government exists to help people who are in need. If you need help be proactive. There is always a way to pull yourself out of whatever hole life has put you in.
Tags: government debt consolidation, government debt consolidation loan, government debt consolidation loans