When you graduate, you will be competing with thousands of other students for available jobs, many of which will be at entry-level salaries. In the beginning years of your career, you may find yourself short of money because of added expenses for an apartment, house, car payment, new clothes for work, and the list goes on. When you are first starting out, the last thing you want are student loan payments that put a cramp in your budget and lifestyle. However, loans are legal obligations that you are required to repay. You must repay both the amount you borrowed (principal) and the amount charged by the lender who loaned you the funds (interest). Like any other debt, there are some very firm rules for repayment outlined in the promissory note that you signed when accepting the loan. You have the right to repay all or part of the loan (s) covered by the promissory note at any time without penalty.
Whatever the total amount borrowed, you are expected to repay the full balance of the loan, plus interest, within ten years. If you have several loans from different sources, this can be quite steep. Monthly payments can be as low as $50.00 or as high as $2,000.
If you have a sizeable student loan debt or make multiple payments to different lenders, you may want to consider loan consolidation. Loan consolidation is a way of lowering monthly payments by combining several loans into one federal consolidation loan.
Loan consolidation can make a difference when it comes to managing your debt. Consolidation has two primary benefits: your various student loans are combined as one loan, making it easier to handle payments and other transactions; and the longer repayment schedule can significantly reduce your monthly payment amount.
To be eligible for consolidation, your loans must be in either the grace period or repayment period, or if in a delinquent or default status, will re-enter payment through loan consolidation. The length of the repayment period is based on the size of the debt.
Loans eligible for consolidation are:
- Federal Stafford (subsidized and unsubsidized)
- Federal Insured Student Loans (FISL)
- Federal SLS
- Federal PLUS Loans
- Federal Perkins Loans
- Health Professions Student Loans
- Health Education Assistance Loans (HEAL)
- Nursing Student Loan Program (NSLP)
You should be aware that the Federal Consolidation Program is not always the best alternative for everyone. Whether or not it is the most advantageous route for you depends on such factors as size of debt, how many lenders you owe, the interest rates of your loans, and whether you plan to exercise certain deferment or cancellation options.
You will have fewer deferment options under loan consolidation and cannot defer payment of interest. If you choose to consolidate your loans, the total interest costs increase as a result of the extended repayment period. Alternate repayment plans may be available to you. Check with your lender or servicer to see if you may qualify for a graduated or income-sensitive plan.
Law Access Loans and Bar Examination Loans are eligible for consolidation through the Access Private Consolidation Loan Program. The repayment period for this program may extend 25 years, depending of the amount you are consolidating.
Married couples can co-consolidate. The couple must agree to be jointly liable for repayment with regard to change in marriage.
Delinquent and defaulted borrowers are eligible for consolidation if the borrower agrees to “reenter repayment through loan consolidation.” The borrower must have made satisfactory arrangements to repay with the insurers. Contact the office of Student Debt Management to find out about the latest consolidation options.
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