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 is a also ways that you can erase your student loan debt by serving your country and your community. Public Student Loan Forgiveness programs (or PSLFs) allow individuals to get out of some student loans by working for the government or certain non-profit organizations.
The good news is – you can qualify for PSLFs by working at any local, state or federal government job. The bad news is that not every student loan is covered by the program. You will also have to wait 10 years and make 120 qualifying loan payments to achieve total debt forgiveness, so it is not an immediate solution.
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.
Unfortunately, only certain student loans qualify for PSLF. This means the program may not forgive all of your student loan debt. Under the current program only direct-subsidized, direct-consolidated, direct unsubsidized, Direct PLUS and Stafford loans qualify.
Private student loans and loans that are in default will not qualify for PSLF. If you qualify for PSLF but your loans do not, you will have to consolidate them before applying. Fortunately, it is possible to convert other kinds of student loans to obligations that are eligible for PSLF by taking advantage of the Direct Loan Consolidation program.
Yes, but you must add at least one Federal Family Education Loan or Direct Loan to the mix. This means you can consolidate loans you have taken out for your graduate degree with loans taken out for your bachelor’s degree.
You should get some advice if you attempt this because it can be real tricky.
Yes, despite what many people think you do not have to be making payments to consolidate a loan. As long as you have an FFEL or a Direct Federal you can consolidate.
The grace will end as soon as consolidation is approved, but we have found that the benefits from deferment and lower payments often make up for that.
Consolidation replaces your existing loans with a new loan. Deferment is a temporary pause of your payment that can be achieved by negotiating with lenders.
Deferment will not change how much you owe, your interest rate or the number of payments you have to make. Consolidation can lower your interest rates and reduce the number of payments.
Absolutely! You can apply for consolidation at any time. The best time to apply for consolidation is usually near the end of the grace period. That way you can take advantage of both.