The 7 Helpful Student Loan Consolidation Tips You Should Know

student loan consolidation

Student loan debt can increase as much as 4% in a single year.

In fact, the average student graduates with about $37,172 of loan debt.

To put things into perspective, the average American household has over $134,000 of total debt.

If you have student loan debt, then you’ve probably thought about student loan consolidation.

In this post, we’re going to tell you the 7 most important tips and things you need to know about student loan consolidation.

1. Know Exactly What It Means

Student loan consolidation means combining all your loan debts to a single monthly payment.

We know that, especially if you have multiple degrees, you may have had to take out several different loans to fund your education.

It’s likely that you have both private and federal student loans. It can be tough to keep track of where to send which amount every month – and it’s easy to get confused or fall behind in payments.

Instead, simplify your life by combining your private and federal loans into one easy payment.

A private consolidation combines both private and federal loans, while a federal consolidation only combines multiple federal loans.

A consolidation may impact your interest rate.

2. Know If You Should Consolidate

Of course, just because you have multiple loans doesn’t always mean you should go for student loan consolidation.

If you have one or more the following:

  • A high interest rate
  • A variety of interest rates
  • Too long/short of a repayment term
  • A desire to switch to either a variable or fixed rate option

You should consider consolidating your private student loans.

3. How Student Loan Consolidation Impacts Student Loan Forgiveness

First of all, keep in mind that each type of consolidation impacts your interest rate differently.

Remember that all your loans must be consolidated into direct loans in order to qualify for any of the forgiveness programs.

For example, if you have Federal Loans only, you will have to go through the Direct Loan Consolidation Program, part of the government’s Department of Education.

When you have Federal loans, even if you consolidate to give yourself more time to pay off your full loan, you may end up getting a higher interest rate.

Private loan consolidation (you may hear this referred to as “Student Loan Refinancing”) gives you an entirely new loan, usually with lower interest.

This happens because another lender pays off your private loans.

4. Know When To Consolidate

There are times in your life when it’s smarter to consolidate your loans.

Especially if you’re thinking about taking on more debt (like credit card or another loan) each month, consolidate your loans before you do so.

Also, if you’re about to start the hunt for a new job or suspect you may be out of work for a while, consolidate your loan before you leave that steady paycheck;

5. Think About Getting A Co-Signer

It depends on the lender you’re currently dealing with, but adding a co-signer is a great way to potentially lower the interest rate of your loans.

Your co-signer will need to share their income/employment information, any monthly payments they make, their Social Security number, and their credit score, among other things.

Remember that your co-signer is not required to be a family member. They just have to have a stable job, good monthly income and credit history, and be willing to lend you a hand!

6. Do Your Research

Not all loan consolidations are created equal.

Don’t go with the first offer you get just because you think it’s going to make your life easier.

You also shouldn’t sign just because you’re getting more time to pay off your loan or a better interest rate.

You need to take the time to figure out which lender will work the best for you. It’s always a good idea to get multiple offers so you can more clearly evaluate the choices you have.

Don’t worry about having several credit inquiries on your record. This is known as “rate shopping,” and any inquiries that are made within 30 days are only counted as one inquiry into your finances.

Remember too, that you don’t have to include every single one of your loans in your consolidation plan. For example, if you’re happy with most of your loans’ interest rates, but think you could do better on a few, don’t panic!

You can keep the plans that work for you, and just consolidate the ones with especially high interest rates.

7. Look Into The Pay As You Earn Plan For Federal Loans

If you have federal student loans, there are still several options for your student loan consolidation.

One of the most popular is the Pay As You Earn Plan (PAYE.)

This has been around since 2012, and it can help to lower the amount you have to pay every month.

However, be aware that you are going to need to be able to prove that you have a “partial financial hardship” to be eligible for the PAYE Plan.

You qualify for a “hardship” when your regular repayment plan is a higher amount each month than the amount you’d pay if you had a PAYE Plan.

Keep in mind that, if you have Stafford Loans, you can’t repay them on a PAYE Plan unless you consolidate.

Even if you don’t qualify for a PAYE Plan, you still have lots of options. We suggest spending some time on the government’s consolidation website to learn more about them.

You’re An Expert In Student Loan Consolidation

If you’re feeling overwhelmed by the amount of money you’re having to pay every month, your interest rate, or just the terms of your repayment, you have options.

We hope this article has cleared up common misconceptions about student loan repayment plans and loan consolidation options.

Looking for more advice on student loans?

We have all the answers you need! Spend some time on our website and blog to learn more about what you can do to make your life and payments easier to manage.

Get in touch with us today to learn more about your consolidation options.