How to Consolidate and Lower Student Loan Payments

 

Over 43 million borrowers owe $1.75 trillion in student loan debt in America alone. Such staggering figures naturally spark many questions surrounding how to manage swelling loan balances that threaten financial futures. 

 

Thankfully, consolidating and refinancing student loans strategically using various federal and private consolidation programs can help corral runaway monthly payments back within budget.

 

This guide covers the ins and outs of student loan consolidation – who qualifies, pros/cons of different routes, consolidation considerations, lowering rates through refinancing, and optimizing repayment strategy. Let’s overcome debt burdens!

Federal Student Loan Consolidation 

The U.S. Department of Education facilitates combining multiple federal student loans into one single direct consolidation loan through its  [federal consolidation program](https://studentaid.gov/manage-loans/consolidation). Qualifying loans include:

 

• Direct Subsidized/Unsubsidized Loans
• Parent PLUS Loans 
• Supplemental Loans for Students  
• Federal Perkins Loans
• Nursing Student Loans

 

Consolidating federal loans together presents several distinct advantages:

 

1. Simpler Repayment – Combine multiple federal loans into one monthly billing payment. No worrying about tracking various loan servicers.  

 

2. Flexible Terms – Repayment terms get extended between 10-30 years offering lower monthly minimums. This reduces payment burden those first lean career years.

 

3. Interest Rate Averaging – Consolidation loan rates equal weighted average rounding up to nearest 1/8th percent. This lowers rates on some balances but could also increase others. Run calculations carefully projecting new rate.

 

4. The Federal benefits should be kept– Consolidated federal loans don’t lose access to federal forbearances, income driven repayment plans, or loan forgiveness options. Even those private lenders lack this key advantage! 

 

5. No Credit Check or Fees – Smooth consolidation application process not involving new credit checks or transaction fees making transitions convenient.

 

So, one can look at whether the interest savings and simplified repayment is worth it depending on how much they owe in federal debts?

Private Student Loan Consolidation

 

Otherwise, various private lenders like college Ave, Splash, and Laurel Road also facilitate streamlining private student loans together off federal program radar.

 

Private consolidations work likewise merging numerous private students debits across servicers into single new loan whereby such borrowers have mixes of federal and private student loans.

 

Benefits private consolidation offers includes:

 

• Combine your Private + Federal Loans Together  
• May Reduce Interest Rates 
• Variable Terms as Short as 5 Years up to 20 Years
• Federal Protections and Benefits Will be Eliminated

 

But, the private consolidation programs cannot consolidate only federal loans. At least one private precursor student loan is required. Run an analysis that looks at new blended interest rates and terms carefully before moving them from under federal umbrella.

Student Loan Refinancing Defined

 

separate from consolidation in essence means paying off existing student loan obligations after acquiring new financing with better market terms like lowering interest rates or monthly payments.

 

Refinancing involves replacing current education loan conditions which could be out of date compared to new financing available upon entering career path as credit worthiness improves since schooling.

 

Primary motivators pushing refinancing:

 

• Lower interest costs through reduced rates
• Tailored payment durations matching budgets
• Ability to take advantage of flexible forbearances during months where cash gets tied up

 

Through Earnest, SoFi, Splash Financial etc., savvy borrowers prequalify their rates by comparing multiple lenders’ terms online for higher savings. Profits go into principal repayment acceleration or alternative investments yielding more money elsewhere.

 

However, consider the tradeoffs between leaving federal loan protections and incentives versus refinancing everything blindly

Key Consolidation Considerations

 

With so many program options now available public and private, ask consider:  

 

1. Total Interest Savings – Will consolidation loan lower lifetime interest costs significantly once rates and terms get blended together? Crunch numbers projecting big picture spend.

 

2. Loan Count Reduction – Are multiple loan statements, minimum payments, due dates becoming unmanageable juggle? Consolidation helps.

 

3. Federal Benefits Preservation – Any federal consolidation eliminates access income driven repayment plans, certain forgiveness options and deferment flexibility. Model assumptions not needing federal perks next 5-10 years.

 

4. Credit Inquiries – Too many credit checks over short duration temporarily ding scores. Space out loan changes minimizing additional hits.

 

5. Career Trajectory – Will income rise substantially in near term allowing refinancing at even lower rates down the road? If so, wait upgrading terms.

 

Run consolidation scenarios tailored to your exact circumstances carefully weighing tradeoffs applicable leveraging tools projecting figures years out. The wrong move risks drowning in more debt unnecessarily!

Alternative Ways Lowering Student Loan Burden

 

Beyond consolidation and refinancing formally, evaluate implementing supplementary strategies lowering loan burdens:

 

Auto-Pay Discounts – Most loan servicers incentivize setting up monthly auto-pay withdrawals knocking 0.25% or more off interest rates. Every bit adds up long run!

 

Make Extra Payments – Voluntarily pay above minimum amounts monthly directly hitting principal balances faster. Even add windfalls like bonuses and tax refunds knocking down sums.

 

Tax Deductions – Claim eligible student loan interest paid as deductions lowering tax bills owed. Just remember, claimed interest amounts no longer qualify payments under new income-based rules.

 

Defer Non-Essential Costs – Get lean elsewhere temporarily deferring big ticket expenses like vacations, housing upgrades, car buying etc. Redirect cash flow attacking debt aggressively right out of college while interest compounds swiftest.

 

Take Advantage Of Employer Repayment Programs – Many companies now offer financial wellness benefits contributing $100+ monthly assisting employees payback student loans faster while retaining talent. 

 

Pursue Forgiveness Options – If working government agencies or non-profits on income-driven plans, certain percentages of debt get forgiven after extended repayment periods. 

 

Thoughtfully weigh all strategies and programs available providing the best outcomes optimizing cash flow diversion paying down principals swiftly while rates remain relatively low minimizing interest buildup. Consolidating and refinancing alone doesn’t provide silver bullet without disciplined accelerated payback efforts persisting years.

Final Thoughts

 

Untamed student loan balances overwhelm budgets postponing other financial priorities like saving for retirement, buying homes, or starting families. But through federal and private consolidation/refinancing options and tailored supplementary paydown tactics, borrowers regain control over runaway debt in tandem with typical career salary increases over time.

 

Implementing even a few techniques covered today accelerates repayment trajectories measurably saving thousands in interest payments extending decades – while budgeting expectations adapt leaner through deferment of other lifestyle inflation wants until achieving zero balances. Future freedom awaits!