8 Things You Need to Know About Student Debt Consolidation

student debt consolidation

Student loan debt was a hot political topic during the election. Some of the candidates even discussed student debt consolidation.

Given the current national student debt stands at $1.16 trillion, it wasn’t hard to see why.

But people talking about how to alleviate the problem in future doesn’t stop your problem of dealing with it now.

A cursory Google check will show you lots of strategies you can try to repay your different loans.

Or you can stop trying to juggle them and their different rates of interest. Look at consolidation instead.

It’s more manageable to keep track of one thing instead of several.

Read on to find out what you need to know about student debt consolidation.

1) It could help you lower your monthly payments.

Student debt consolidation is particularly attractive if you have a range of private loans.

If you have a good payment history on your existing loans, you might get more favorable terms as well as a lower interest rate.

But you’ll need good credit to access the best rates. After all, you’d be taking out a brand new loan in order to pay off existing ones.

And if you include federal loans in your consolidation, you could lose any benefits attached to them.

You can find out more about our consolidation services for private loans.

2) You can access direct loan consolidation on your federal loans

Before 2006, interest rates on federal loans varied. If you timed it right, you consolidated your loans at a lower rate of interest.

But interest rates on new loans became fixed in July 2006.

You can still consolidate your federal student loans through the Department of Education without a credit check. Following this route fixes your interest rate for the lifetime of the loan.

That way, you’ll be able to plan your repayments. Bear in mind the interest rates won’t be lower. They’re based on your existing rates.

You’ll get a weighted interest average that’s rounded up by 1/8 of 1%. That just means that if the weighted average interest on your loans is 4.2%, then your new interest rate is 4.3%.

So consolidating federal loans won’t make your payments lower. But it will give you access to certain repayment programs.

3) Consolidating gives you less paperwork to keep track of

You’ll already know how much paperwork is involved when it comes to loans. It can get overwhelming.

Working out your options for consolidation can give you even more. So why not put all of your paperwork into one place?

Our team will start by giving you a free student loan health checkup. That way, we can work out which program will best suit your needs.

We even have a team of processors who will take care of all the necessary documents for your review. They’ll help you through every step of the process.

In fact, we’re so certain of the ease of our process that we offer a 100% money back guarantee. It couldn’t hurt to get your checkup.

4) Student debt consolidation can let you access forgiveness programs

If you have loans under the older Federal Family Education Loan Program, don’t worry. Using consolidation lets you transfer those loans into the Direct Loan program.

That gives you access to the Public Service Loan Forgiveness. If you qualify, this federal program forgives your federal student loans.

You can find out if you’re eligible for PSLF.

But you do need to have made 120 payments on-time in no less than 10 years, and be employed full time in the public service or nonprofit sector.

Be aware that if you reconsolidate a direct loan, then you’re resetting the clock on qualified payments if you want to access loan forgiveness.

So if you’ve made 5 years worth of payments under the PSLF scheme and you reconsolidate, then you’ve lost the benefit of those 5 years and have to start again.

5) Term limits can also change under consolidation

Most student loans default to a 10-year plan. But using direct loan consolidation will let you access much longer terms.

If your balance is over $60,000, then you could even have a repayment term of 30 years.

Don’t feel that you have to include all of your loans in a consolidation. When making an application for direct consolidation, your federal loans are added automatically.

But if you have other loans with lower rates of interest, you can exclude them from the consolidation. Keep them separate and keep the benefits of their lower rates.

6) Use consolidation to get debts out of default

If you have defaulted on one of your loans, the consolidation might be the answer.

Normally loan rehabilitation would be the route if you wanted to remove the default from your credit history. Consolidation won’t do that.

But the rehabilitation process can take a long time. And you need to qualify for it before you can get things moving.

Consolidation will get your loan into good standing again in far less time. While it won’t clear your credit history, it will save you from other penalties.

7) Consolidation means paying for longer

The graduating class of 2015 graduated with an average of $35,051 in student debt – the highest in history. So one of the key benefits of consolidation for private loans is those lower monthly payments.

But student debt consolidation also extends your loan. Combine the longer loan with the lower repayments and you’ll also end up paying more in interest.

It’s a good idea to compare your current monthly repayments with the repayments you’ll make after consolidating to see if you will be better off.

But if you’re really struggling to make your payments, then it might be the best option.

8) You may lose benefits of federal student loans by consolidating

You can’t refinance federal student loans with the federal government. You can only convert them into private loans or combine them with private loans to consolidate them.

Just make sure you check what benefits or protection you had with the federal loans. Those benefits might include interest rate discounts or deferred payments if you find yourself unemployed.

You’ll lose them when you move into student debt consolidation.

We can’t tell you in this post which option is the best for you. Everyone has different circumstances which will dictate the best plan for them.

That’s why we tailor our suggestions to your needs.

So if you’re still keen to access the benefits of student debt consolidation, then contact us today. We can discuss your individual situation and get you on the road to stress-free payments.