If you are one of millions struggling to make your student loan payments each month you have probably thought long and hard about ways to reduce your payments to ease the financial burden. If you have considered student loan debt consolidation, there are some important things to know before you agree to a consolidation loan.
Private Vs. Federal Loans
Consolidating your student loan debts can lower the number of lenders you are responsible for paying each month in addition to lowering your total monthly payment amount. When you consolidate your debts you essentially swap your old loans for a new one, usually a single lender that pays off the other loans. The real question to whether this is a good strategy for you is: do you have federal or private loans?
Ideally, you would want all of your loans to fall under one umbrella of federal OR private. The reason is that these two types of loans cannot be consolidated together, making it more difficult to achieve the benefits of a student loan debt consolidation. If your loans are under a single umbrella, this is what you need to know:
Private student loans can be consolidated through a “direct consolidation loan“, which carries an interest rate determined by the average interest rate at the time of consolidation.
Federal student loans can be consolidated by blending the interest rates in your current loans into a single federal loan. If your federal loan already carries an interest rate lower than would be found through consolidation you can lower your payment through the Pay As You Earn program.
Ask a student loan debt lawyer to review your loans and discuss ways to best lower your payments and get free from the financial burden of paying massive monthly payments.