Being a college student is no small task. Between tuition, books, and living expenses, at times one can barely make ends meet. After graduation, things can go one of two ways: better or progressively worse. Keeping up with debt payments can seem hopeless. Here are 3 reasons why consolidation may be right for you.

With over 40 million Federal student loan borrowers, many of whom are in forbearance as part of the CARES Act,  there’s no better time than now to consolidate. By making one payment with one interest rate versus making multiple payments  with varying interest rates, you reduce the confusion, delays in processing and also eliminate some of the frustration that can be experienced as part of the process altogether.  

When you submit a loan consolidation request through the U.S. Department of Education (DoE),  your student loans get a fresh start. Your new servicer who is taking over your student loan account, will pay all of your existing accounts in full and open a new account under their company for you. After your consolidation is complete, you will be issued a brand new loan with a single payment.

Lower monthly payment

While consolidation may not always reduce your monthly payment amount, it does however keep your options open as it applies to qualifying and applying for repayment and loan forgiveness programs with the DoE. Conversely, depending on how much you owe, consolidating could offer you a lower payment. It could also extend the length of your loan anywhere from 10 – 25 years.. 

Multiple repayment options

As a Federal student loan borrower, you have multiple repayment options to choose from. Consolidated repayment options include: Standard repayment (10 – 30 years ), Graduated repayment (10 – 30 years ), Extended repayment (25 years), Income based repayment (10% – 15% of discretionary income; 20 or 25 years), Income contingent repayment (20% of discretionary income; 12 years) and Income sensitive repayment (15 years). It’s also important to note that borrowers can change their repayment plans at any time at no cost. 

Loan discount

Many servicers offer an interest rate reduction if the borrower sets up direct-debit payments through their website. A direct-debit discount reduces the interest rate for borrowers who make automatic payments on their federal student loans. The DoE offers a 0.25% interest rate reduction to federal student loan borrowers who sign up for auto-debit.

Currently, there is a major overhaul taking place with Federal student loan servicers. Nelnet and Great Lakes have not been awarded servicing contracts, which means if you pay your loans to either company this will be changing soon. With the current COVID-19 pandemic and the government offering student loan payment relief through forbearance, you want to make sure you are checking your account online on a regular basis for any changes or updates to your account. 

There are businesses who offer free assistance to alleviate the stress of navigating the student loan repayment process. Before you select a company  to help you with consolidation, rehabilitation or repayment; do some research online to compare Federal student loan servicers (to ensure you pick the right one). Read actual borrower reviews to find out what their experiences have been and how the servicer works with their borrowers.   

The long term benefits of consolidating your student loans are plenty, limitless and yours for the taking! If you have questions about your student loans or the consolidation process, we can help. Schedule an appointment with us today!

Related: 3 Reasons to Rehab Your Student Loans Before December 31st 2020