Education at a higher level than usual is very expensive in the United States and Canada and, the only way for most students to make it through college, is by contracting student loans. Most students usually go for one or several government guaranteed loan programs to put together the needed amount. However, because of the limitation of budget funds, the federal government has set up a ceiling up to which students can get money through the use of a government guaranteed loan program. If their needs exceed that limit (the current annual limit for government guaranteed loan programs is $18,500), the students have to contact private financial agents. Together with this drawback another one appears: the use of private agents excludes the possibility of government loan consolidation which is a very valuable tool in the hands of indebted students.



Government loan consolidation, also called federal loan consolidation or Stafford loan consolidation, allows the student to put together all the college loans contracted under a government guaranteed loan program or more governmental programs of a similar nature. Through government loan consolidation, the student will pay a unique interest rate, which remains fixed over the entire period of the government guaranteed loan program. He or she may enjoy additional benefits provided by the governmental agencies in charge of the government loan consolidation scheme.

A government guaranteed loan program may take several forms. Each of them allows a different formula of government loan consolidation. There are direct federal loans which allow a direct federal loan consolidation program. The student deals only with the agencies of the government and has to worry about paying back to the government uniquely. Another example of student loan is the Federal Family Education Stafford loan, which has its own structure of Stafford loan consolidation. A government loan consolidation program may combine more of these types of government guaranteed loan programs. A government loan consolidation scheme, however, will not include private loans, not even if they are mixed with federal college loans. Private companies may provide their own systems of bundling up the different student loans. It is usually believed that a government loan consolidation scheme will offer more benefits to the students than any private scheme of loan bundling.

This latter comment is highly questionable though, because this evaluation depends very much on what the student is looking for. It is usually assumed that the students are looking primarily for cheaper rates, for any possibility of paying back on their loans whether this implies less financial mobility or not. With this assumption, a Stafford loan consolidation scheme is the best option, because it will offer the lowest aggregated interest rates. Although this may be interesting to some, there are graduates who are able to make money faster just after getting out of school and they may be more interested in having financial flexibility. While getting the lowest rates may not be their primary concern, being able to pay out their loans sooner or dealing with private agents might sound better to them.. For such people, federal loan consolidation is not the best option.

Overall, government loan consolidation is an extremely useful tool for the student interested in going to college in North America. Both the United States and Canada are oftentimes criticized for having a private system of education that is too expensive for many. This way, valuable student who come from low-income families do not have access to higher education and thus do not get the chance to improve their condition. Still, since the system of private education has been in place for so many years, alternatives have been found and one of them is the government guaranteed loan program. The federal government either lends the money to the students and their families directly, or acts as a guarantor for the students’ lending from other agencies, or offers subsidies for the payment of interest rates. In addition, through government loan consolidation, the governmental financial institutions offer means of simplifying some of the tedious financial operations that keep the students from their books. In addition, government loan consolidation significantly reduces the amounts that the students have to pay back on their loans after graduation. Such programs are a sign that the government of North America is trying to soften their “mean" appearance.