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.


Saturday, November 08, 2014

Student Loan Debt Consolidation - Myth vs. Reality

Good stuff from

There has been a lot written and said about student loan debt consolidation over the years. The point of this blog is to debunk three common mythes floating around the Internet about consolidation benefits.

The consolidated interest rate changes every July 1.

MYTH. The reality is variable rate Stafford loan rates are subject to change each July 1, which directly impacts your consolidated interest rates.

Like a home mortgage I can refinance my student loans multiple times

MYTH. The realty is that it’s a one shot deal. When you consolidate your federal loans you are locked in for life at the interest rate. I know, seems pretty ridiculous doesn’t it?

I need to consolidate within six months of leaving school or I’ll lose my eligibility

MYTH: Consolidating within six months may be beneficial to students with variable interest rate Stafford loans due to the fact that a lower interest rate is extended to you during that six month window (2% versus 2.5%). However, it is not required that you consolidate within six months. You have an indefinite time frame in which to consolidate your student loans.

Tuesday, January 21, 2014

Direct Loan and FFEL Program Loan Forgiveness, Cancellation, and Discharge Summary

Borrower's total and permanent disability or death 100 percent If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies. ------------------------------------------------------------------------------------ Bankruptcy (in rare cases) 100 percent Cancellation is possible only if the bankruptcy court rules that repayment poses an undue hardship to the borrower. ------------------------------------------------------------------------------------ Closed school (for borrowers who could not complete their program because the school closed while they were enrolled or borrowers who withdrew not more than 90 days before the school closed) 100 percent For loans received on or after Jan. 1, 1986. ------------------------------------------------------------------------------------ False loan certification (school falsely certified a borrower's eligibility to receive a loan) 100 percent For loans received on or after Jan. 1, 1986. ------------------------------------------------------------------------------------ False certification by reason of identity theft (loan was made as a result of the crime of identity theft, as determined by a court) 100 percent Effective July 1, 2006. ------------------------------------------------------------------------------------ School does not make required return of loan funds to the lender Up to the amount that the school was required to return. For loans received on or after Jan. 1, 1986. ------------------------------------------------------------------------------------ Full-time teacher for five consecutive years in a designated elementary or secondary school or educational service agency serving students from low-income families. Must meet additional eligibility requirements. Up to $5,000 (up to $17,500 for elementary/secondary special education teachers and secondary math and science teachers) of the total loan amount outstanding after completion of the fifth year of teaching. Under the Direct and FFEL Consolidation Loan programs, only the portion of the consolidation loan used to repay eligible Direct Loans or FFEL Program loans qualifies for loan forgiveness. For Direct Subsidized and Unsubsidized Loan and Subsidized and Unsubsidized Federal Stafford Loan borrowers with no outstanding balance on a Direct Loan or FFEL Program loan on Oct. 1, 1998, or who have no outstanding balance on a Direct Loan or FFEL Program loan on the date they received a loan after Oct. 1, 1998. PLUS loans are not eligible. To learn more about the eligibility requirements for teacher loan forgiveness and to find out whether your school or educational service agency where you teach is considered to serve low-income students, go to Teacher Loan Forgiveness. ------------------------------------------------------------------------------------ Loan forgiveness for public service employees (Direct Loan Program only) 100 percent of the remaining outstanding balance on an eligible Direct Loan. For a borrower who is not in default and who makes 120 monthly payments on the loan after Oct. 1, 2007, under certain repayment plans, while the borrower is employed full-time in a public service job. You may not apply for forgiveness until after you have made all of the required 120 qualifying monthly payments.