Living with two or more student loans can be really challenging, especially for those trying to establish a career or start a family. Fortunately, there is a potential solution to this problem in the form of student loan consolidation.
With loan consolidation, one new combined loan takes the place of your existing loans. The big advantage to this is that it can lower your payments and lower your interest rates. It can also make your life much simpler because you will only have one payment and one lender to deal with.
There are two popular kinds of student loan consolidation programs available to you:
Private and Direct Student Loan Consolidation Explained
With Private Student Loan Consolidation, a private lender pays off your existing loans and issues you a new obligation. In contrast, Direct Student Loan Consolidation is actually a federal-lending program created by The Reauthorization of Higher Education Act of 1992.
President Obama greatly expanded direct student consolidation through the Federal Direct Student Loan (also known as the Obama Student Loan Forgiveness) Program in 2010. This program offers significant advantages for people who are struggling with student loans.
Like most federal programs, the Direct Student Loan scheme can be complicated and hard to understand. If you need some more guidance, call 844-669-4407 to speak with one of the experts at Student Debt Relief – a private organization that has a long history of helping students understand debt forgiveness programs.
How Student Loan Consolidation Can Help You
There are many benefits to both the private and federal student loan consolidation programs. The most obvious is simplifying the process by having one lender, one interest rate and one payment per month.
Another big advantage can be found in flexible payment plans, which allow you to base your repayments off of your income. The Direct Student Loan program allows some borrowers with very low incomes to make payments of $0 a month. Some of these plans will even allow you to reduce your payment if you run into financial hardship, such as facing an unexpected medical emergency or suddenly losing your job.
There is also an Income Based Repayment Plan that will forgive interest on the subsidized portion of loans for the first three years. Note: this program is only available when the monthly repayment is less than the interest repayment.
An even better deal is loan forgiveness which can eliminate up to 100% of your debt. The Direct Student Loan Program will forgive the remaining balance on loans after 20 to 25 years if regular payments were made in this time period.
When to Avoid Student Loan Consolidation
Consolidation is not always the best solution for student loan debt relief. There are even times when it can make the situation worse.
In some cases, consolidation can actually make it harder to pay off loans by creating a bigger payment and extending the payment period. Sometimes it is actually faster and cheaper to pay off smaller student loans separately. You may also lose any benefits you might get from existing loans, such as lower interest rates or flexible payment plans.
So the key point is – only consolidate when the consolidated loan presents a better deal for you than your existing obligation.
Need More Advice?
The experts at Student Debt Relief can answer all of your questions about student loan consolidation, and they can tell you if you are eligible for the program or not. You should contact them now and begin the process, because President Trump is contemplating changes to the Direct Student Program that might affect your consolidation options.