In 2017, the average college graduate owed more than
$39,000 in student loan debt often requiring payments to multiple lenders beginning
6 months after graduation. Graduates typically have a combination of loans
from government and private lenders. Consolidating multiple student loans
can often reduce the monthly financial burden for graduates while making
repayment more convenient.
Federal loans can be consolidated one time under the federal
Direct Consolidation Loan programresulting in one monthly payment. The interest rate will be based on the
average of the interest rates on loans being consolidated. While this
will likely result in paying more over time since the repayment term is
typically extended, your monthly payment should be lower. You will also
benefit from making one monthly payment rather than keeping track of multiple
payment due dates. The no-cost application can be completed online.
Loans from private lenders cannot be consolidated under the federal program.
However, some private lenders, such as
SoFi, can consolidate all types of loans into one package. Should you choose
to consolidate federal loans via a private lender program, be aware that
you will lose some rights and options which were part of the federal loan.
In these private programs, you are essentially refinancing the loans. Generally,
this is only recommended if the resulting loan will provide a lower interest
rate. Private lenders are not tied to criteria required in the federal
program. Instead, your credit score and income will be considered. If
you have a good credit rating and a new job with a sufficient income stream,
you may be able to reduce the overall interest rates of the loans being
Loans from private lenders have various repayment options. For example,
SoFi offers loans with 5-20 year terms. The online application process
is very brief, and you will know in minutes if your loan has been approved.
Should you lose a job after repayment has started, SoFi provides a three
month break from payments, although interest will still accrue. Do your
research to find the best program for you.
Repayment of student loans affects your credit rating. It is obviously
in your best interest to make regular payments on time, but sometimes
that is not always possible, and the financial burden can quickly get
out of hand.
At the Law Offices of James C. Shields, we help people with all their bankruptcy
questions. For more information on managing student loan debt, please