The current trillion dollar student loan situation is something that has most people scratching their heads. At the time of applying for the loan or taking out a student credit card, students don’t really put much thought into the situation and leave their future selves to deal with the debt.
As the numbers keep rising, students are faced with a heavy sum at the time of graduation. While loan forgiveness is a completely different matter, the only thing you can do at this point, to make sure you pay off your loan without breaking your bank is by simplifying matters.
What is Student Loan Consolidation?
Consolidating your student loan entails taking out one larger sum in order to pay off all previous debts in order to have one singular bill at the beginning of the month. This not only simplifies the payment process but also reduces the amount that you have to pay per month as the payments are stretched out over a longer period of time.
Are You Eligible?
There are different eligibility requirements for student loan consolidation and you will need to figure out if you fall into that lucky category.
Federal Loans
If you’ve taken out a federal loan to finance your education then your chances of being eligible for loan consolidation are good. Most federal loans can be consolidated. These include;
- Unsubsidized and Direct Subsidized Loans
- Unsubsidized and Subsidized Federal Stafford Loans
- PLUS loans from the FFEL Program
- Supplemental Loans for Students
- Federal Perkins Loans
- Health Education Assistance Loans
- Direct PLUS Loans
- Federal Nursing Loans
Private Loans
In case you’ve withdrawn a private loan then the chances of consolidating it as such are slim. This means that if you have a combination of federal and private loans then they cannot be consolidated into one. The applicant will have to withdraw a separate consolidated loan for the private loan and a separate one for the federal. If however you only have private debt, then a singular consolidated loan may cover it.
Meeting the Criteria
There are several criteria that you have to meet in order to be able to consolidate your student loans.
At least one of your direct loans needs to be in the process of being repaid or in the grace period. In addition all defaulted loans need to be taken care off before any loans can be consolidated.
If a loan has already been consolidated, it cannot be consolidated again.
Do Your Research
In the end it always comes down to numbers. Even if your loan can be consolidated and you meet the eligibility requirements, chances are that consolidation might not be such a good idea for your situation.
It boils down to your payment capabilities and your short term and long term interests. If you are willing to pay a larger amount in the long run in lieu of smaller payments today then loan consolidation may be right for you.
On the other hand of you can manage the payments and can cover the loan in its originally specified time; then it might be best to avoid loan consolidation.
Sources
http://www.forbes.com/fdc/welcome_mjx.shtml
http://loanconsolidation.ed.gov/borrower/bloans.html
http://www.forbes.com/sites/maggiemcgrath/2013/09/30/5-things-you-need-to-do-with-your-student-loans-right-now/
