Should you consider student loan consolidation?Leave a Comment
Should You Consider Student Loan Consolidation?
Many people rely on student loans to get them through their education. Unfortunately, they did not just take out one or two student loans. Some took out several loans and are now struggling to pay. Multiple student loans are popular since one student loan is not enough to cover the education expenses. If you also in this position and you are struggling with multiple loans, do not let this continue for too long. You can do something about it. You can consider student loan consolidation. You should, however, note that you can only consolidate federal loans. Private student loans cannot be consolidated.
Is Student Loan Consolidation the Right Choice for You?
Student loan consolidation can give you the opportunity to relax and breathe easy. Your loans will be combined into a single payment. Lenders will no longer call or text you to remind you of due dates. Loan consolidation also allows you to make lower monthly payments and there is no need to keep track of numerous due dates. Although it may sound like the perfect solution, you should only consider loan consolidation if you can save on interest rates. There are other benefits associated with the student loan consolidation. Let check them out.
Benefits of Federal Student Loan Consolidation
Flexible Payment Options
This option offers you several payment options to choose from. You only need to go over them and choose the one that will work for you. One option is the Income-Based Repayment (IBR), which allows you to repay the loan based on your earnings. There is another option called the Income-Contingent Repayment (ICR), which allows you to repay the loan based on both your income and family size. One good thing about the payment plans is that you can change plans based on your eligibility.
Student loans usually have grace periods. When you are filling out the student loan consolidation form, you should indicate the grace period on the form. Clearly state the time you leave school. If you fail to do this, the consolidating company will process the loan right away and you will end up losing your grace period.
Public Service Loan Forgiveness (PSLF)
The PSLF is also available under the federal loan consolidation. However, the applicant will need to meet to additional requirements.
Things You Should Consider
Before you apply for a loan consolidation, these are some of the things you should consider.
There is a special way of calculating the interest rate on direct consolidation loan. It is the weighted average of all the loans you are consolidating. This is then rounded to the one-eighth of 1%.
Extending your term means more payment
You should also have in mind that when you extend your payment term, you will end up paying more interest rate. Although you may be making lower payments at the end of every month, the total amount you will pay will be high.
You should also take note of this. If the loans you intend to consolidate are in the grace period, you should indicate that on the forms. The lender will delay the processing until the grace period is over. If you do not indicate this on your form, the consolidating company will process the loan consolidation immediately and you will lose your grace period. The reason why it is important to indicate the loan consolidation is that once the company processes the consolidation, you will need to begin the repayment of the loan.
Direct Parent Plus Loans
Direct Parent PLUS loans are not eligible for combining into a consolidation loan The direct parent plan loans can be consolidated but only under certain conditions. You can only add them if you are going to choose the Income-Contingent Repayment plan. They are not eligible for the Income-Based Repayment plan.
Requirements for Your Direct Loan Consolidation Eligibility
1. You should be out of school before applying for a loan consolidation.
2. The loans you intend to consolidate must be in grace period or they must have forbearance, delinquent, or deferment status.
3. At least one of the loans must be under the Federal Family Education Loan (FFEL) or the Direct Loans program.
4. If the loan you want to consolidate is a defaulted loan, there are two options. You may make loan repayment arrangements with the lender before you consolidate. You may also decide to repay the consolidated loan under the Income-Based Repayment plan or the Income-Contingent Repayment plan.
5. If the loan you want to consolidate is an already consolidated, it is not easy to consolidate that loan again. However, if you add another direct loan or FFEL program loan to the existing consolidated loan, you will be able to go through with the loan consolidation.