What is Student Loan Consolidation?
Student loan consolidation is a way to combine your federal student loans into a single loan. This allows you to have all your loans in one place with a single payment, while keeping federal loan benefits. If all your student loans are federal student loans, then you are probably eligible for a Direct Consolidation Loan. Some federal student loans are not eligible, but many of the common ones are. If you have both private and federal student loans, you can convert your federal student loans into a Direct Consolidation Loan. If you get a Direct Consolidation Loan, you are also still eligible for federal income driven repayment plans and public student loan forgiveness.
Consolidating your loans, like anything, has it's pros and cons. It can be easier to keep track of your loans when you consolidate into one payment. Consolidation can also lower your monthly payment by extending your term length. This can be good in the short term, but it will increase the amount of interest you pay over time. You also want to make sure that consolidating your loans does not make you lose any other loan benefits, such as interest rate discounts or cancellation benefits. A Direct Consolidation Loan will also cause you to lose any qualifying payments made towards the PSLF program.
How do I Consolidate my Student Loans?
If all your loans are federal student loans, you can apply for a Direct Consolidation Loan here. For the Direct Consolidation Loan, it's as simple as logging into the federal aid website and filling out their form. The application can be submitted online or by mail. The application only requires some personal information as well as the loans you do and don't want to consolidate.
What if I don't want to consolidate my loans?
An alternative to the Direct Consolidation Loan would be to apply for private student loan refinancing. The company will buy out your current loans and your new interest rate can change based on your credit. Doing so will also make you lose your federal loan protections. One option is to consolidate federal student loans with the Direct Consolidation Loan and refinance private loans separately to keep federal loan protections. This option should only be taken if you are eligible for a good rate by refinancing.
You can even refinance your loans to an Income Share Agreement with Defynance. This option gives plenty of flexibility in payments as it is based on income. It even has protection for many people that make it easier to pay back and removes the specter of debt from the equation.
