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.
The Federal Loan Forgiveness Programs currently offer several repayment options.
The plans that are currently available include:
Forbearance is a federal program that provides a temporary pause in FFEL and Federal Direct Student Loan payments for those who are unable to pay.
Consolidation results in a new federal student loan that replaces a number of existing loans. Consolidation can change your payment amounts and interest rates, while forbearance simply puts the payment off to the future.
Bankruptcy is a legal process that can wipe out your debts. Unfortunately it will not affect student loan debts. Consolidation will not eliminate your debt, but it can make student loan obligations easier to manage by lowering interest rates and giving you just one payment.
After you graduate, leave school, or are attending less than half-time.