26
Oct-21
Your Guide To Student Loan Consolidation
Student loan consolidation is a way to combine multiple federal loans into a single direct consolidation loan. By applying through the U.S. Department of Education’s Federal Student Aid office, borrowers can streamline the bill-paying process, lower monthly payments and find a repayment plan that fits their needs. Borrowers who have defaulted on one or more federal student loans can use consolidation as an alternative to loan rehabilitation.
Reasons to Consolidate School Loans
In general, student loan consolidation is only available for federal loans. Refinancing, on the other hand, is available to borrowers of both federal and private loans. For borrowers with federal student loans, consolidation can help lower and simplify monthly payments. It’s also a great way to access additional repayment plans and borrower protections, rehabilitate a defaulted loan or otherwise ease the stresses of debt repayment.
Student loan consolidation may be a good option if you want:
- Lower monthly payments. Student loan consolidation extends the repayment period to up to 30 years, thereby lowering your monthly payment. Keep in mind, however, that you’ll pay more interest on your loan in the long run.
- Simplified payments. If you’re currently making student loan payments to multiple servicers, consolidation can streamline this process so you only have to pay off one loan.
- More repayment options and borrower protections. Consolidating federal loans enables borrowers to choose from a number of income-driven repayment (IDR) plans. What’s more, borrowers who would not otherwise be eligible for Public Service Loan Forgiveness (PSLF) can qualify by consolidating their federal loans under a direct consolidation loan.
- A different loan servicer. If you’re having trouble with your current federal student loan servicer, consolidation gives you the flexibility to choose a new one. When completing your consolidation application, you’ll be asked to select a servicer for the new loan.
- An alternative to loan rehabilitation. If you already have student loans in default, loan consolidation can help you pay off that loan if you agree to repay the new loan under an IDR plan or make three voluntary, on-time and full monthly payments on a defaulted loan before consolidating it.
source: https://www.forbes.com/advisor/student-loans/student-loan-consolidation/