Benefits Of Student Loan Consolidation
Student loans are a fact of life for many Americans, with roughly 44 million borrowers owing more than $1.4 trillion in student loan debt as of 2017. Some borrowers find it easier to manage their student loans by consolidating them into one monthly payment. This can be helpful if you have multiple types of loans, such as federal and private, or if you’d like to combine multiple loans into one lower interest rate. It’s important to understand the benefits and drawbacks before taking this step though—consolidation might not be right for everyone!
Fewer monthly payments
Fewer monthly payments
One of the best benefits of student loan consolidation is that you can make fewer payments and have them spaced out more. This will make it easier to budget, as you’ll only have to worry about paying one bill instead of several. It can also be helpful to reduce the number of bills you need to pay every month.
Lower interest rates
One of the most important benefits that a student loan consolidation can bring, is lower interest rates. The reason for this is because you are able to consolidate all of your loans into one single payment each month. This allows you to be able to focus on just one payment instead of multiple ones. In addition, when your loans are consolidated they are no longer in forbearance or deferment which means that they will start accruing interest again which increases the amount that you have to pay back at the end of the term and thus increases how much interest you pay over time!
As mentioned earlier, student loan consolidation involves combining multiple existing student loans into one new loan with a single monthly payment due date. However, each borrower’s ability or eligibility for doing so depends upon their financial circumstances including income level and credit worthiness as well as whether or not there are other outstanding debts such as car payments or mortgages on record within consumer credit reports maintained by three major credit reporting agencies: Equifax Inc., Experian PLC and TransUnion Corp.
Loan forgiveness in some cases
If you consolidate your student loans, you can also become eligible for loan forgiveness in certain cases. For example, some students who qualify for the Public Service Loan Forgiveness Program (PSLF) can have their remaining balance forgiven after 120 on-time payments under a qualifying payment plan. The Teacher Loan Forgiveness Program is another option that allows teachers who work in low-income schools or qualify as full-time faculty members at a tribal college or university to have their remaining debt forgiven after working for at least five years in an eligible position. And finally, income-based repayment plans such as PAYE or IBR may also reduce your monthly payments by extending the term of your loan over up to 25 years and capping them at 10% of your discretionary income for 20 years before forgiving whatever amount remains unpaid after that time period has passed.
Access to other benefits
With student loan consolidation, you also gain access to other benefits.
- You can sign up for Income-Driven Repayment plans if you qualify (this means your monthly payments will be lower than they were before).
- You can get help from our financial aid office if you need it.
- You can choose between several repayment options that best suit your needs and budget.
Requirements for consolidation
Before you can consolidate your loans, you must meet the following requirements:
- You must be in good standing with all of your existing student loans and have no delinquency or default issues.
- You must maintain satisfactory academic progress toward a degree or certification as defined by your school.
- The borrower must be a U.S. citizen or permanent resident, who is not in default on any federal education loan, has never been in default on any federal education loan, and maintains satisfactory academic progress as defined by their college’s policies and procedures (these financial aid requirements may change from year to year).
- In order to qualify for consolidation after leaving school, borrowers must have attended at least half-time for at least one academic year prior to dropping out of school; if they took out more than one loan during this time period then each one counts toward that requirement but only one can be consolidated into another type (e.g., subsidized into unsubsidized). If someone has only had one loan then they need only attend full time for two semesters before being eligible for consolidation even if this extends beyond six months since graduation day; again though all other eligibility criteria still apply so don’t expect an extension just because you’re waiting until next semester starts up again before applying!
How to consolidate your student loans
- You can consolidate your federal loans through the Direct Consolidation Loan program.
- You can consolidate your private loans by refinancing them with a new lender. This involves entering into a new contract, so it’s important to compare rates and terms from multiple lenders before making any final decisions.
- If you don’t want to refinance with another company, but still want a lower rate on your student loans, consider consolidating through one of the many federal loan servicers who offer this service at no cost to borrowers.
Consolidating your loans can simplify your payments and save you money.
When you consolidate your loans, you are combining multiple federal and private student loans into one loan. This means that you will be making just one payment each month to the lender instead of multiple payments to different lenders. The amount that you save on interest depends on how many loans have been consolidated, but regardless of the size of your consolidated loan, it is likely that consolidating will help save money.
You also may be able to lower your monthly payment by consolidating since some lenders offer reduced interest rates or other incentives when they offer consolidation options. If a lender offers these incentives, they usually apply them once a borrower has consolidated their debt with them. Additionally, if all of your loans qualify for Public Service Loan Forgiveness (PSLF), then consolidating can help ensure that this benefit can still apply after PSLF takes effect in July 2019
Consolidating your student loans is a smart decision that can save you money and help you keep your debt manageable. If you’re interested in learning more about how to consolidate your loans, contact us today.