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How to Consolidate Debt After Student Loan Relief

When your loans default, consolidation is one of the few ways to get back on track. If you consolidate your default loans, you can either pay the total, on-time consecutive payments or agree on an income repayment plan.

Most people only think about consolidating their loans with the debt still hanging over them, but not anymore. Once you get relief on student debt, you can find ways to consolidate your debt which you can quickly pay. Below are some ideas on how you can get student loan relief and how to consolidate debt after.

Student Loan Relief

The sums can be quite ridiculous when you are an individual borrower for a student loan. But with forgiveness or income-driven repayment plan and public service loan forgiveness, you can get debt relief for your student loan. There's a catch, though, for both. Forgiveness is the best kind but has limited programs, while PSLF can only erase debt after several years of repayment.

Eligible Loans for Forgiveness

Forgiveness programs, as much as they're the best, are quite limited and only carter for direct loans by the federal government. You can also get Student Loan Forgiveness for Stafford loans. You can consolidate the federal loans under one direct consolidation loan if you have the above or any other federal loan. Before the relief is offered, you must be among those who qualify.

Income-Driven Repayment Plan Forgiveness

Most student loans have a standard repayment period of 10 years, but this only sometimes suffices for many borrowers. If the borrower feels the monthly payment is unaffordable, they may enter an IDR program. In some cases, the program will stretch the payment period to around 25 years.

Once the term elapses and you have paid all the qualifying payments, the balance is forgiven. These programs' payments are based on factors such as family size and household income. Ideally, the payments are capped at a percentage of your discretionary income. Depending on your plan, the payment can be capped from 10 – 20 per cent. Some of the IDR plans you can get include:

  • REPAYE – a 20-year payment plan for an undergrad loan and a 25-year plan for a grad or professional study loan.
  • Pay as You Earn Repayment – has a 20-year payment plan, and payments are capped at 10%.
  • Income-based Repayment – a repayment period of 20 years and a monthly payment capped at 10%. This, however, only applies if you didn't have any outstanding balance when the loan was received.
  • Income Contingent Repayment – with a 25-year payment plan and 20% monthly cap on repayment, this is one of the smartest choices if you can afford it. You can also opt for a fixed payment plan of 12 years adjusted to your income.

Public Service Loan Forgiveness

When you work in a state, federal, local or tribal government, you may qualify for this type of forgiveness. If you work for a non-profit organization full-time, you also qualify for the PSLF. But you need to make at least 120 payments to the loan balance, which don't have to be consecutive.
To qualify for this program, you'll need to have worked for at least ten years and have a direct federal loan. It can also be an option if you can consolidate federal loans into direct loans.

There are a few things to note when you apply for this program, as it is full of technicalities which have made many borrowers fail to qualify. You can use the PSLF help tool to help you get through the technicalities.

The debt burden falls squarely on the borrower, but you can get some relief on a student loan with the above programs. Once you qualify, you can then consolidate your debt and make it easy to pay with the more extended payment plans available for each. Contact us.