Government Backed Student Loan Consolidation Programs
Through the Higher Education Act, or HEA, there are student loan consolidation programs under both the Direct Loan Program and the Federal Family Education Loan Programs. With these programs, a borrower’s student loans can be paid off and a new loan is then created that encompasses the total balance of the previous loans.
When the loans have been consolidated, the new interest rate may be lower than one or all of the previous student loans. In addition, it is also possible that the loan term may be extended, allowing for a lower monthly payment than the total amount the borrower was previously paying. In this case, the debt may become more manageable for the borrower, resulting in a lower rate of loan default.
Recently, a new repayment plan became available to borrowers who are consolidating their government backed student loans. This Income-Based Repayment, or IBR, Plan bases the borrower’s new monthly loan repayment on their annual income. Applications must have at least a partial financial hardship in order to enroll.
The IBR repayment plan is an alternative to the ICR, or Income Contingent Repayment Plan. It is essentially designed to make repaying one’s student loans more manageable for those who are intending to pursue jobs that pay lower salaries such as those in the public service sector.
It is important to note that the Income-Based Repayment Plan is not available for repayment of a borrower’s Direct PLUS Loans that were made to parent borrowers, as well as for Direct Consolidation Loans that were created to repay PLUS Loans that were made to parent borrowers.
Therefore, those who possess these types of student loans must repay their consolidation loan under one of the other repayment plans if they wish to include these types of loans into a new consolidation loan.
In most cases, borrowers who are interested in consolidating their government backed student loans may apply online. Before doing so, a borrower should read over the required documents, also available online, and the application forms. Applicants may also check the status of their consolidation application throughout the process.
Private Student Loan Consolidation Programs
In addition to student loan consolidation programs for government backed student loans, there are also student loan consolidation programs that are available for those who possess private student loans.
These programs are offered via private lenders and they allow borrowers to combine multiple private student loans into one single loan with just one monthly payment, oftentimes lowering the total and making repayment of one’s student loan debt more manageable.
Borrowers of private student loan consolidations will typically need to provide specific information in order to apply. This includes the name of their alma mater, the current amount of student loan balances that they intend to consolidate, contact information, social security number, and driver’s license number.
Those who are consolidating student loan debt through a private program must have a steady and reliable income, otherwise a cosigner will likely be required. In this case, the cosigner must possess a regular income as well as a good credit history.
Where to Find Additional Information
There are several programs available for initiating a student loan consolidation. These will differ depending upon whether your student loans are government related or were obtained via private lenders.
For those who possess government backed student loans, visit this website for more information. This website provides education on loan consolidation programs under both the Federal Family Education Loan (FFEL) Programs and the Direct Loan Program.
Borrowers who are interested in consolidating private student loans through a private student loan consolidation program should start with a loan application.