How to Consolidate Your Student Loans and Save Money
As college costs continue rising, many graduates face significant student loan debt. One strategy that can help manage and reduce your student loans is consolidation. Here is a guide on how to consolidate student loans and save money:
The first step is to confirm you have federal student loans that are eligible for consolidation. Generally, most federal direct loans, PLUS loans, and FFEL loans qualify. Private student loans usually cannot be consolidated. Run your full federal loan profile to assess eligibility.
Compare consolidation options
There are a few avenues for federal consolidation – a Direct Consolidation Loan with the Department of Education or consolidating through private lenders. Compare terms, fees, protections, and repayment plans to choose the best option for your situation.
Apply to consolidate
Next, complete the application through the lender you select. You’ll need personal information, your loan accounts, servicer details, and references. The consolidation lender will pay off and bundle your existing loans into one new loan.
Select an ideal repayment plan
One key benefit of consolidation is getting to choose new loan repayment terms, usually based on loan balance, income, and loan term. Options include standard, graduated, extended or income-driven plans. Pick terms affording comfortable payments.
Leverage lower interest rates
If you consolidate variable-rate loans or older fixed-rate loans, you may be able to lock-in a significantly lower fixed interest rate on the consolidation loan. This lowers the total interest you pay over the life of the loan.
Simplify loan servicing
Rather than making multiple loan payments to different servicers each month, you’ll have just one payment to the consolidation lender. This simplifies the repayment process into a single track. Autopay can ease the process further.
Gain access to protections
Through federal consolidation, borrowers regain eligibility for hardship deferments, forbearances, and income-driven plans. This provides options if you’re struggling to make payments due to unemployment, disability, or other factors.