What is Student Loan Consolidation?
Student Loan Consolidation combines all of your current student loans into one. After a consolidation has been completed, a borrower would only have to deal with one term, one payment, and one interest rate. Consolidating your student loans gives you the simplicity of only working with one servicer as well as access to many more repayment options that you may not have previously qualified for.
Will Student Loan Consolidation Lower my Monthly Payment?
Yes! How much will vary by the type of loans you have and the terms that you are placed with, but there are many ways consolidation can help lower your monthly payment. Below is information on the 2 Types of Student Loan Consolidation. Private Student Loan Consolidation and Federal Student Loan Consolidation.
FEDERAL STUDENT LOAN CONSOLIDATION
Student Loan consolidation is the process of using one new loan to pay off or refinance all of your other existing student loans. This allows the borrower to have only one convenient monthly payment and creditor. Student Loans can be consolidated privately or on the federal level.
Federal Student Loan consolidation can also benefit the borrower as it may make them eligible to enroll their newly consolidated loans into government sponsored repayment plans and/or student loan forgiveness plans like the Obama student loan forgiveness plan (PAYE), the Public Service Loan Forgiveness Plan (PSLF) the income based repayment plan (IBR) the Permanent Disability Forgiveness program and more. All federally backed student loans can be consolidated and then enrolled into a new repayment program.
Direct loan consolidation can be very beneficial when looking to enroll in a student loan forgiveness plan because these programs only work with direct loans. Your federal student loans are eligible for consolidating after you graduate, leave school or when you drop to half time status. Once you apply to a federal student loan consolidation program, it generally takes 30 to 60 days for the loans to be consolidated. However, the time it takes to consolidate is worth it with all of the different benefits such as:
- Save money on interest over the life of your loan
- Lower your monthly payments by extending the repayment term
- Access to more repayment options like student loan forgiveness programs
- Simplifying your repayment with only one monthly payment to one servicer
With different loans charging different interest rates, it can be overwhelming to keep track of them all. If this is overbearing, it might be time to consider consolidating your loans. A student loan consolidation combines multiple loans into one new loan and applies the weighted average interest rate. The result is one new monthly repayment plan and interest rate.