Submitted by Rachel R on Fri, 07/06/2018 - 11:00am
Should you consolidate student loans?
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It’s rare that someone has just one student loan. Even if your major stays the same and you stick to the same college and power through in four years or less, you won’t have just one student loan. You’ll have many. That’s one of the reasons it can be a challenge to get your debt under control in the aftermath of leaving college.
If you’re lucky and all your loans are with one loan servicer, it might not be so bad. However, that’s rarely the case, and you’ll likely have many different loans, at various interest rates, and with more than one loan servicer. One option that can simplify your student debt is consolidation, where all the loans convert to one larger one.
You’ll then have one loan, one servicer, one interest rate, and one monthly payment. Sounds nice, but is this the best approach? Let’s look at the pros and cons of consolidation.
Consolidation is a term that applies to federal loans. If you have private loans that you lump into one, that’s a refinance. If you migrate federal loans to a single private loan, that’s also a refi. With this option, the private lender pays off your fed loans and writes you a new debt obligation.
While consolidating or refinancing your student loans may simplify repayment and help you get organized, there are definite downsides, particularly if you ever struggle financially. Here are some things to consider about consolidation.
Before you decide that consolidating your federal loans is the best option, you should stop and think about the alternatives. If you earn a good income and won’t face any financial problems, consolidating or refinancing may be best for your finances.
The big issue is that federal loan consolidation is a one-time-only deal. Once you consolidate, you cannot do it again ever. That may sound like no big deal, but consolidation is more than just a matter of convenience. It is a get-out-of-default card you can only use once.
If you run late on your loans to the extent that you fell into default, you can consolidate and get a fresh start on your federal student debt. There are some conditions around consolidating defaulted debt. You must make three monthly payments on the debt first, then consolidate.
For those already in default, you might find it much harder to refinance than consolidate since private refi arrangements require a healthy credit score. Those in default might also want to consider whether bankruptcy might be a better solution.
If you’re older, partially or totally disabled, earning a low wage, never completed your degree, or have other conditions that indicate repayment poses an undue hardship, you might obtain discharge in North Carolina bankruptcy.
To discuss your student debt with bankruptcy expert, contact the Law Offices of John T. Orcutt. Read reviews then call +1-833-627-0115 to schedule a student loan bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
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