Many students must borrow money to pay for college. Some even take out several loans in order to cover the costs of tuition, books, room and board. If this sounds familiar, you may be wondering if loan consolidation is right for you.
Most federal student loans can be consolidated if you graduate college, drop below half-time enrollment or leave school. Before you consolidate your student loans, consider the following:
Benefits of Consolidating Student Loans
Loan consolidation can simplify the payoff process, reduce your monthly payment by extending the term of your loan, and even allow you to switch from a variable interest rate to a fixed-rate loan. If you’re struggling with student loans, consolidation may help you manage your debt and stay current on payments.
Downsides of Consolidating Student Loans
Although student loan consolidation can be helpful, it may limit your options in the future and can end up costing you more over time. When all of your loans are consolidated into one, you can’t specifically target higher rate loans for payoff. You may also lose any forgiveness benefits attached to original loans. Additionally, you can’t ‘undo’ loan consolidation. You’ll want to carefully consider if consolidation is the best option for your situation.
How Does Loan Consolidation Work?
A Direct Consolidation Loan combines multiple federal loans that may have different terms, repayment schedules or lenders. It has a fixed interest rate based on the weighted average of the interest rates of your individual student loans. You can choose from a variety of plans including standard, graduated, extended, income-contingent and income-based repayment.
Which Loans Are Eligible for Consolidation?
Consolidating your student loans is free, but there are requirements for eligibility. First, borrowers must have at least one Direct Loan or Federal Family Education Loan in grace or repayment status. If you meet this requirement, you can also consolidate PLUS Loans, Perkins Loans and health professions loans. In-school status loans are ineligible.
How Do I Consolidate Student Loans?
If you’re ready to get started, complete the steps at https://studentaid.ed.gov/sa/repay-loans/consolidation to submit your application online. If you still have questions, nonprofit student loan counseling from Take Charge America can help you decide if consolidation is the right repayment option.
Get started now! Call 877.784.2008 or schedule a call here.