Monday, November 10, 2014

Student Loan Debt Consolidation

Here's a checklist of things to do for student loan debt consolidation. The very first step: Take inventory of your student loans.
For information on your student loans, review your loan documents, and contact your lender or loan servicer. If you are uncertain of your current lenders or loan servicers, you can find them by going to

Monthly Payment Amount
If you are not in repayment status yet, estimate your monthly non-consolidated loan payment based on the current interest rate and your loan balance. You can get payment amounts by calling your lender or loan servicer.

Next Steps
* Determine whether your monthly payment exceeds the percentage of your income to be allocated to student loan payment. This percentage should be based on a realistic budget. (If payment exceeds monthly allocation, reevaluate budget and assess income situation.)

* Consider deferment or forbearance option for short-term payment relief needs. (If debt relief needs are long term, consider consolidation.)

* Select loans for consolidation.

* Determine monthly payment and total interest costs for Consolidation Loan and compare to cost of repaying loans without consolidation. (For help in calculating monthly payments, contact your lender or loan servicer.)

* Consider the impact of consolidation on future deferment options, cancellation options, and other borrower benefits such as interest rate discounts or principal rebates, which can significantly reduce the cost of repaying your loans. You might lose some discharge (cancellation) benefits or deferment benefits if you include certain types of loans in your Consolidation Loan—Federal Perkins Student Loan, for example. To find out more about the impact consolidating might have on deferment and cancellation benefits, contact the holder of your loan.

* If you decide consolidation is right for you, contact your lender to begin the consolidation process.

* If still in the grace period, consider consolidating approximately two months before the end of the grace period to allow enough time to have your Consolidation Loan processed before the grace period expires, yet not so early that you lose too much of your grace period if you have a FFEL Consolidation Loan. (For FFEL Consolidation Loans, if you consolidate during the grace period, you give up whatever portion of your grace period remains. You retain all of your grace period, however, if you have a Direct Consolidation Loan.) Some FFEL lenders offer to hold disbursement of Consolidation Loans until the end of the grace period to enable borrowers to minimize their interest rate and maximize their grace period.

* Remember that if you consolidate during your grace period, you can lock in an interest rate at least a half percent lower than the current repayment rate.

* When filling out the consolidation application, provide complete address information, include two references, and sign the promissory note.

* If already in repayment, make sure to continue making payments on your loans until consolidation is completed. (If you need immediate payment relief, request deferment or forbearance.)

* If you have questions about consolidation, do not hesitate to contact your lender or loan servicer. Check your loan documents for the toll-free customer assistance number.