Should I Consolidate My Loans?
A Student Loan Consolidation allows borrowers to combine all of their federal student loans into one new loan with one lender. Sending two, three, or even four separate payments to different lenders and trying to track your loan balances, interest rates, and due dates can be quite cumbersome. The consolidated student loan will be much easier to manage and keep track of. There are many other benefits to the federal Student Loan Consolidation program as well.
Student Loan Consolidation can greatly simplify loan repayment by centralizing your loans to one bill and can lower monthly payments by giving you up to 30 years to repay your loans. You might also have access to alternative repayment plans you would not have had before, and you’ll be able to switch your variable interest rate loans to a fixed interest rate. Once your loans are combined into a Direct Consolidation Loan, they cannot be removed. The loans that were consolidated are paid off and no longer exist. CLASS Financial can help with your Student Loan Consolidation today! Call (844) 236-3332 to see if your loans qualify.
What types of loans can be consolidated?
Most federal student loans, including the following, are eligible for consolidation:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
- Direct PLUS Loans
- PLUS loans from the Federal Family Education Loan (FFEL) Program
- Supplemental Loans for Students (SLS)
- Federal Perkins Loans
- Federal Nursing Loans
- Health Education Assistance Loans
- some existing consolidation loans
Private education loans are not eligible for consolidation. If you are in default, you must meet certain requirements before you can consolidate your loans.
A PLUS loan made to the parent of a dependent student cannot be transferred to the student through consolidation. Therefore, a student who is applying for loan consolidation cannot include the PLUS loan the parent took out for the dependent student’s education.
When can I consolidate my loans?
Generally, you are eligible to consolidate after you graduate, leave school, or drop below half-time enrollment.
What are the requirements to consolidate a loan?
If you are interested in a Student Loan Consolidation:
- You must have at least one Direct Loan or FFEL Program loan that is in a grace period or in repayment.
- If you want to consolidate a defaulted loan, you must either make satisfactory repayment arrangements on the loan with your current loan servicer before you consolidate, or you must agree to repay your new Direct Consolidation Loan under the
- Income-Based Repayment Plan,
- Pay As You Earn Repayment Plan, or
- Income-Contingent Repayment Plan.
What is the interest rate on a consolidation loan?
A Student Loan Consolidation has a fixed interest rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%. There is no cap on the interest rate of a Student Loan Consolidation.
Student Loan Forgiveness Aspects
By consolidating your loans into the Direct Loan program, you open doors to student loan forgiveness programs that may not have been available to you otherwise. Every consolidated loan will be forgiven at the end of 25 years if a balance is remaining. This means you could be in an income based payment paying less than what you would normally pay in the standard repayment, and after 25 years the balance is forgiven.
To qualify for Public Service Loan Forgiveness, you must have Direct Loans. Consolidating into the Direct Loan program will make you eligible for Public Service Loan Forgiveness if you meet the other criteria of the program.
Teacher Loan Forgiveness is also available to borrowers with Direct Loans, consolidating may make you eligible if you meet the other criteria of the Teacher Loan Forgiveness program.