The pros and cons of government debt consolidation programs.
If you’re struggling to repay your student loans, government debt consolidation programs may be a helpful option. Most federal loans are eligible for Direct Consolidation, including Direct, Stafford, Perkins loans and more.
With government debt consolidation programs, you’ll consolidate multiple loans into a single new loan, with a new interest rate and payment terms. With just one check to write each month, you’ll find it easier to keep track of your loan payments. Additionally, a government debt consolidation plan can lower your monthly student loan payments by increasing the amount of time you have to pay back the loan and giving you access to other repayment options. If your original student loans have variable interest rates, government debt consolidation programs can convert your debt to a fixed interest rate, providing more predictability and possibly a lower monthly payment.
One of the drawbacks of government debt consolidation programs is that if your previous loans had benefits like rebates, interest rate discounts or forgiveness, you might lose those benefits after consolidating.
Are government debt consolidation programs right for you?
Government debt consolidation programs are an excellent option for many people, but not necessarily for everyone. When you’re having difficulty making student loan payments, there are many options available to you, and it’s helpful to talk to a debt consultant who can walk you through different strategies for reducing your debt.
American Consumer Credit Counseling (ACCC) is a nonprofit debt counseling agency providing free credit counseling and low-cost services to consumers nationwide. Our certified and highly trained counselors can explain all the ins and outs of government debt consolidation programs, and help you decide which one (if any) is right for you.
Alternatives to government debt consolidation programs.
At ACCC, our counselors help you to understand all the options available to you for paying your student loans or managing additional debt. We often recommend a debt management program as a highly effective alternative to government debt consolidation programs, and for people seeking debt consolidation with bad credit. Under a debt consolidation program, consumers consolidate monthly payments instead of debts, and our team works with their creditors to seek reductions in finance charges and late fees, and to re-age accounts, helping to reduce the total amount owed.
Further, we offer a wealth of information about money management and credit counseling online. These materials are free of charge and can help consumers to budget more efficiently and learn more about how to reach their financial goals.
Learn more about government debt consolidation programs at ACCC.