How do student loan consolidation programs work? Are they backed by the federal government?

Answer 1

Usually every term that a student is in school, he has to take a loan for that term. After 3 or 4 years (with 3 to 4 terms a year) it gets ridiculous keeping track of all the loans. Especially if you attend more than one school during you training. So a consolidation loan allows you to combine them all into one loan with one payment. That single loan payment is often less because you are not paying administrative cost for a dozen loans.

While the federal government does offer such loans, not all loans are from the government. Private banks and other financial institudes also offer student loans, as they make money off them just like they do any other loans. the government does regulate insterest rates on student loans, which is why they are much lower than normal loans.