If you have student loan debt, don’t panic! There are a number of repayment options to help you eliminate that debt responsibly. The faster you can do this, the better off your finances and future options will be. Learn more about when consolidating student loans works.
How Consolidating Student Loans Works
You may have heard of debt consolidation from friend family or even the TV. Let’s take a deeper look at debt consolidation when it comes to student loans and what it means for your student loan payment.
What Is Debt Consolidation?
Student loan consolidation takes all your federal student loans or all your private loans and creates one new loan, with a simpler repayment plan. Borrowers with loans from multiple sources or several loans from one lender might consider consolidation.
Those with federal student loans can apply for a Direct Consolidation loan. And borrowers with private loans also have options to consolidate through their loan servicer or a competitor.
Student loan consolidation may or may not reduce your interest rate. You will typically also have a longer repayment schedule which means paying more interest over time. While one student loan payment is nice, do the math before consolidating to make sure it’s the best option for your loans.
Check out this video on student loan consolidation!
What details do I need to know about my loans?
Make sure you know all of the following information about your student education loans:
- Private, federal or a mix of both
- Repayment start date
- One loan payment or multiple
- Career field
- Income expectations
- Interest rates
Each of these items can make your loans a better or worse candidate for consolidation.
When Consolidating Student Loans Works
Consolidating student loans works best in a few scenarios. Remember that these are general tips; please consult your financial adviser for specifics on your unique scenario.
Here are a few scenarios when consolidating student loans works:
- You have all or a number of private loans, plus a good credit score. When consolidating your loans, your credit score needs to be good enough so your new loan terms will be favorable.
- You have federal student loans and want a simpler repayment plan. Additionally, you don’t need any of the federal student loan repayment benefits, like the Public Service Forgiveness Program.
If you’re struggling to pay off debt, ACCC can help. Sign up for a free credit counseling session with us today.