A government debt consolidation loan is a loan given by a government program in order to help a person pay off debts owed to multiple institutions. By consolidating these loans, the debtor is able to make just one payment at a time, instead of making many payments. Not only are these loans more convenient, but they also ensure that all of the loans operate under the same, often lower, interest rate. The interest rate is usually lower because government loans are considered “secure” debt, whereas loans from other institutions are referred to as “non-secure.”

Most often, a government debt consolidation loan is used to help college students pay off student loans. This is done in order to help students without a high credit score get the best possible interest rate. As a result, students are able to get out of debt more quickly and easily.

When a person signs up for a government debt consolidation loan, the government agency or consolidation company pays off the debt in full to all of the collectors. The consolidator then issues a new loan for the same amount with a secure interest rate. The borrower is required to repay the consolidation company in full according to a set of pre-determined conditions.

A benefit of a government debt consolidation loan is the convenience this type of loan offers. Instead of making loan payments to various vendors, the borrower is able to make one payment to one institution. The loan can always be paid on the same date, and the borrower does not have to worry about different arrangements and rules. Without the confusion of multiple payments, a person has a better chance of getting out of debt with less stress in a shorter period of time.

Another benefit of debt consolidation is that monthly payments are often lower. Many times, the length of the loan can be increased in order to decrease monthly payments and make repayment more feasible. There are often a variety of payment plan options, depending on the consolidation company.

There are four common programs offered by a government debt consolidation loan. The standard payback plan sets a general monthly payment amount, which is consistent over the time of the loan. The extended payment plan increases the time of the loan, therefore decreasing the monthly payment. The graduated payment plan starts out with a lower monthly payment amount, and increases after a specified time period. Finally, the income contingent plan takes the borrower’s income into account when setting the monthly payment.