How to Consolidate Student Loans – The fastest Way to Get Out of Debt
Learning how to pay off student loans using federal student loan forgiveness programs is important for any potential borrower. Private and federal student loan forgiveness programs are available through the Department of Education through various programs. One such program is the Federal Direct Loan Program, which forgiveness benefits borrowers who have not been able to repay their loans for five or ten years due to circumstances beyond their control.
To find out if you qualify for federal student loan forgiveness, contact your financial aid office at the school you attend. They will be able to give you specific instructions on how to qualify. There are many qualifying factors, including grade level and payment history. You also may be eligible for other relief through the federal government.
If you do not qualify for federal loan forgiveness programs, there are other options available to you. One way to consolidate your student debts is to obtain a Perkins loan. Perkins loans are provided by private organizations, not the federal government. The federal government does not provide funding for educational expenses related to college, graduate or post-graduate education. However, private organizations do.
Perkins loans are based on income and family status. Borrowers who fall into certain income brackets are more likely to qualify than others for federal student loan forgiveness. Typically, these borrowers earn between ten and fifteen thousand dollars annually, which falls into the lower income bracket. This income bracket is considered low income for tax purposes. Ten years and younger are eligible to borrow, but must repay at least the first year.
The second option to consider is an income-driven repayment plan (IPR). An IPR plan is very similar to a traditional loan forgiveness program. If borrowers earn less than the amount required to repay their loans, a portion of their interest is forgiven. Typically, borrowers repay the full amount after ten years.
One of the most popular options for how to consolidate student loans is a direct consolidation loan. When you consolidate federal student loans, you combine all of your loans into one. For most, this is accomplished by taking out one loan and securing a new Direct Loan. Direct subsidized loans are provided by the federal government. These types of loans are not dependent on an individual’s income and can be repaid regardless of financial need.
The third option, a graduated repayment plan, is another choice for how to consolidate federal student loans. Graduated repayment plans consolidate federal student loans into either subsidized or unsubsidized loans. Subsidized loans have a lower beginning interest rate and payment schedule while unsubsidized loans have a higher interest rate and payment schedule. A borrower must begin repayment on his or her first subsidized loan prior to beginning any unsubsidized loan. Another advantage to a graduated repayment plan is that borrowers gain a credit score discount if they maintain their loans throughout their entire time at college. This allows them to reduce their interest costs.
Once the decision on which repayment plan is best suits the needs of a borrower has been made, he or she must consider how to find the right lender. In most cases, the borrower should begin by contacting the schools financial aid department. Many schools participate in the federal Direct Loan program and allow the borrower to apply for a federal Student Loan once he or she has been accepted to a college or university. In addition, many banks offer private student loan programs that the borrower may apply for as well. Once a lender has been found, the borrower must then contact the lender to complete the necessary paperwork.