Lots of different people consolidate their student loans for lots of different reasons. One reason is that they just get graduated from college, and you have to face the fact that you are going to pay your loans, either immediately or after a brief period. When you sit and take inventory of your loans, you may see that they are all different. There could be:
- Federal Loans
- Private Loans
- Undergraduate School Loans
- Graduate School Loans
Also, since all the loans begin in different years, each one could have a different interest rate and different terms.
This looks like a nightmare for which you will need a big spreadsheet. There is a lot to think about where to start it. At this point, consolidating your loan can make your life a lot simpler and minimize the mistakes.
If you have private loans, then you can evaluate some lenders to get a better interest rate. Or even a fixed rate by consolidating. Good credit scores on your credit card report can help you get good interest rates, but there can be fees that will be charged for private student loan consolidation.
For the federal loans, the process is free and pretty much a one-stop shopping trip. You just have to go to Student Loans website where you will get tons of information. There will be information about which federal loans are eligible for consolidation and which ones are not.
Also, how your interest rates on federal loans will be averaged and weighted so that after consolidation, you will end up with the same overall rate. Best of all that one can learn that by consolidating your federal loans into a direct federal consolidation loan, you may have the opportunity to choose one of the income-driven repayment plans, such as:
- PAYE Plan
- REPAYE Plan etc.
All of these offer repayments. Depending upon the plan any remaining debt could be forgiven in 20 or 25 years. If you do choose one of these payment plans, you also are eligible to get forgiveness in as little as ten years by working in a public service job.
If you are out of school or college for several years, then you may wish to switch to one of these federal plans. However, till now most of the elder borrowers were left out of these affordable plans. I 2015, a new repayment plan called, REPAYE, will include all federal student loan borrowers, no matter when they got their loans and provided that those loans have become the direct federal loans through consolidation of all your loans.
Unlike the other income-driven repayment plans REPAYE will not have an income requirement. But, just like the other plans, the new lower monthly payments will be a small fraction of their income. However, under the REPAYE the discretionary payment will be calculated from the income of both the spouses rather than just the borrower alone.
Therefore, every student has the option to get affordable student loan payments by using the consolidation program. It up to each individual how they manage things for themselves ineffective way. The options are there for them to avail.