Consolidation and refinancing are both options for easing the repayment of student loans. The act of consolidation means combining loans and is only available for federally guaranteed student loans. This list includes:

  • subsidized and unsubsidized loans,
  • Stafford loans,
  • Perkins loans,
  • Nursing loans,
  • and many more.

To qualify, you must have two or more federal student loans and have graduated from school. You may also qualify if you still attend school and are eligible for other loan assistance.

Combining your loans can make it easier to pay off your loans with one monthly payment.

Consolidation and Interest Rates

While possible with a private lender, consolidation often results in higher interest rates. This costs you more upfront and over the long-term.

Carefully examine the interest rates you are currently paying on your loans. If you have a fixed rate, you may find that consolidation results in a higher interest rate.

If you have a variable rate loan, it may help to consolidate your loans to stabilize your interest rates.

Some people are so overjoyed at the prospect of lowering their monthly payments that they don’t care about the potential increase in repayment terms or interest rate changes.

Tip: Try using a student loan calculator to see how different rates affect your payments and total debt owed.

Tip: To apply for loan consolidation, use the official Student Aid loan consolidation form.

Refinancing Loans

If you can’t consolidate your private loans, you may want to investigate refinancing. Refinancing lets you get different terms or interest rates.

Refinancing private loans is dependent on your credit score, income, and other debts. This is not an option if you are having difficulty making your regular payments.

It can be helpful to your financial situation, however, if you can get a better interest rate on your private loans. You have a better chance of refinancing if your debt payments are less than 40% of your gross monthly income.

Defaulting on Student Loans

And now for the tough story on default. If you haven’t made special arrangements and have ignored payments, you may be in default. Federal loans are in default after 270 days of missed payments and private loans after 120 days.

In most default cases, bankruptcy is not a cure-all for discharging student loan debt. That doesn’t mean your case is hopeless. There are steps you can take to get back on track for repayment. The first step is to contact your lender.

Tip: If you have trouble locating the information to contact your lender, you can call the Default Resolution Group at the US Department of Education (toll-free: 800-621-3115) for federal loans. You can also check your credit report to find private loan contacts to discuss default recovery.

Once you make contact, you and your lender need to agree on terms for repayment. In some cases, if you show for six months to a year that you can repay your loans, you can revisit making beneficial terms.

Additional Resources

One of the best sites for student loan help is the US Department of Education.

More information, including details about default, private student loans, and bankruptcy can be found at FinAid.

Your student loan problems won’t fade away or improve with time unless you take action.

Conquer your reluctance or embarrassment by exploring repayment options. Then you can concentrate on other important aspects of your life.