- The premise behind student loan consolidation is twofold. The primary goal of consolidation is to take multiple loans and combine them into one, giving you just one monthly payment each month. Another reason to consolidate is the possibility of getting a better payment rate on that one loan. Even though student loan interest rates are fixed, you can still lower your monthly payment by agreeing to extend the term of the loan.
- The major downfall of student loan consolidation is that it can only be done once. In other words, if you've consolidated your student loans once, you can't do it again. In essence, you're stuck with whatever rate you received when you initially consolidated. If you're having financial difficulty, you can apply for a forbearance or an income-based payment plan.
- Most student loan lenders offer forbearance to its customers so that they can defer their monthly payments for a specified period of time. Forbearance requires an application, which includes providing a reason why you can't pay your student loans during the forbearance period. This is an ideal solution if you're going through a short-term hardship but think you can manage your payments after you get caught up. The bad part is that while your loans are in forbearance interest will accrue on your loans unless you make interest payments to your lender.
- If you wanted to consolidate but are unable to because you've already consolidated, you might see similar benefits from entering an income-based repayment plan. This plan sets your monthly payment at a maximum of 15 percent of your paycheck, though USA Today.com states that the actual amount is usually less than 10 percent. Going this route means that your monthly payments will increase as your salary does, but it will remain within a manageable level.
Student Loan Consolidation Basics
Re-Consolidation
Forbearance
Income-Based Repayment
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