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Federal Student Loan Consolidation

Consolidation could give borrowers a fresh start with their student loans.

It can get them get out of default quicker than a rehabilitation program, and could become eligible for more financial aid. It  could also reset the allotted forbearance and deferment time available. In addition, consolidating could also open the doors for more repayment and forgiveness options.

Pros
of consolidating student loans

  1. Consolidating your student loans can bring all of your current loans under one servicer so you can potentially have only one monthly payment with one averaged interest rate. This can ease the burden of student loans because you will not have to worry about which loans you have paid, and which you have not. Having consolidated loans could also look better on your credit report, rather than multiple lines of credit.
  2. Consolidating could reset the 36 months allotted for forbearance and deferment.
  3. If you have certain types of loans then you could be restricted on which programs you qualify for, but with a consolidation, you have could have access to enroll into more Income Driven Repayment plans through the Department of Education.
  4. If you are a government worker or an employee of a nonprofit organization, then consolidating your student loans could make you eligible for Public Service Loan Forgiveness.

Cons
of consolidating student loans

  1. Consolidating your student loans could extend your repayment term from 120 months (10 years) up to 360 months (30 years), depending on your loan balance.
  2. If you already had direct loans, and you were current on a standard 10-year plan or an Income Driven Repayment plan, then consolidating your loans could reset your time if you are being considered for PSLF. If you made 2 years worth of payments and then consolidate, those 2 years would not count.
  3. If you consolidate your loans out of default, it would not erase the derogatory marks off your credit report. Only a rehabilitation program could do that for you but it does take up to 12 months to complete.
  4. If you consolidate your current student loans, you could waive away certain benefits for those previous loans because you must sign a Master Promissory Note. This is essentially a promise to pay your new consolidated loan. For example, if you were going to dispute your loans, consolidating would make that difficult because you now combined all your loans.

Most federal student loans, including the following, could be eligible for consolidation:

  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Supplemental Loans for Students
  • Federal Perkins Loans, cannot be consolidated by themselves, there must be another FFEL or direct loan.
  • Nursing Student Loans
  • Nurse Faculty Loans
  • Health Education Assistance Loans
  • Health Professions Student Loans
  • Loans for Disadvantaged Students
  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans
  • FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)

When Can I Apply for a Consolidation?

Generally, you can apply for a consolidation once you have graduated from school, or have left school, or have dropped below 6 credits per semester. Your student loans would need to show that they are not in “FULL TIME” status, and must be in repayment. There is no cost to applying for a consolidation if you plan on applying on your own through the Department of Education. On the other hand, if you need assistance and would like someone to assist you through the consolidation process, please call 855-906-3851.

The process of consolidation begins with three easy steps:

  1. Understand what a consolidation could do for you and if it benefits you – There are pros and cons to consolidating. Before choosing to consolidate your student loans, make sure it is the best option for you. If you are unsure, give us a call and we can help assess your current situation.
  2. Understand your different repayment options – Consolidating could allow you to go from multiple loans to a single new loan with one payment, one interest rate and one lender. But with a federal consolidation, you have the choice of multiple repayment options which can be based of your income and family size. Be sure to choose a repayment plan that could offer the lowest monthly payment. Please note, your interest rate would be a weighted-average from your previous federal loans.
  3. Take Action – Once you understand what a consolidation can do and whether it benefits you or not, along with a repayment plan you want to pay under, then all you have to do is complete the application online.
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Submitting your applications correctly and in a timely manner could result in lower monthly payments so give us a call today!