Consolidation of your Federal Student Loans may help!
When you consolidate your Federal loans, outstanding individual loans are combined into a single new loan. This will provide some significant benefits.
- You will have only one loan servicer moving forward, with a single point of contact, with one payment date and payment amount each month
- Additionally, you will have a single interest rate and loan term.
- A Consolidated loan may offer additional repayment and forgiveness options that may not be available otherwise. The Federal Government has created multiple plans to assist loan holders who wish to lower their monthly payments and also qualify for long term loan forgiveness. We are asked every day “is there really such a thing as loan forgiveness”. The answer is: Absolutely yes! However it doesn’t work the way most people think that it does. Here is an outline of how the process works. 4 Steps!
Federal vs Private Student Loan Consolidation
Understanding the differences will help you determine the best choice for your individual situation. Both options may help reduce monthly payments through interest reductions (Private) or by utilizing Federal Income Based Repayment plans (Federal). However you should keep in mind that if you Consolidate Federal loans into a Private loan, you will be loosing significant payment flexibility and forgiveness options that are not available through Private lending institutions.
Federal Student Loan Consolidation Process
The Federal Government has created multiple plans to assist loan holders who wish to lower their monthly payments and also qualify for long term loan forgiveness. We are asked every day “is there really such a thing as loan forgiveness”. The answer is: Absolutely yes! However it doesn’t work the way most people think that it does. Here is an outline of how the process works. 4 Steps!
- A borrower of federal student loans applies for consolidation. Regardless of the number of loans, or the loan balance, all Federal loan holders may apply for Consolidation. However, the status of loans may affect immediate eligibility.
- Once accepted and Consolidated, all loans are combined with one loan interest rate, term, payment, and Servicer.
- Upon Consolidation, borrowers are able to enroll in one of multiple repayment choices. Many plans consider income and family size where payments are designed to be affordable and as low as $0/month.
- After considering who your employer is (more on this later), along with completing a qualified number of payments, even if they are $0/month, any unpaid principle and interest is then forgiven. There may or may not be tax implications to the forgiven amount.
Recognized benefits of Federal Student Loan Consolidation
No matter what the status of you loans may be (deferment, forbearance, current, late, defaulted, default with tax offset, default with wage garnishment) there is likely a path to accomplish consolidation, income driven repayment and possible loan forgiveness
- Consolidation acceptance is not determined by your credit score
- After consolidating, defaulted loans are either “paid in full” or “rehabilitated”, and are helpful in repairing credit scores.
- Extending loan terms are often possible, lowering monthly payments
- Payments plans are designed to be “affordable” and flex with income and family size. They can be as low as $0/month.
- Depending on who your employer is, some people are able to qualify for accelerated forgiveness and have their loans discharged in 1/3 the standard term. Cutting years and reducing thousands of dollars of payments.
- Applicants may choose their loan servicer (Great Lakes, FedLoan Servicing, Nelnet, Navient)