Debt Consolidation Programs

Currently, there are thousands of graduates with more than five student loan debts. The loans run after you everywhere you go, and it catches up fast. When you have more student loans than you can count, and having a difficult time making the monthly on-time payments, debt consolidation programs may be the only way to get rid of your numerous loans.


Education is expensive. That, we all are aware of. But we usually have the mindset that after the four or more years in the degree program, we’ll acquire a lucrative job to help with the load of debts accrued throughout the school years. It’s a good plan, but it doesn’t always work out the way you think. Even if you get a good job, the mindset to work effectively will not always be 100 percent. The reason is that there are thousands of dollars in debts weighing on you which needs to be paid off, and fast. 


You need help, and that’s why loan consolidation programs can be the best way to get rid of your loans. However, you have to know that debt consolidation programs are not everyone’s first option. Why is that? You need to consider a lot of factors before you proceed with the consolidation program. But first, how does debt consolidation work?


In this guide, you’ll know: 

  • How the debt consolidation works, 
  • What the debt consolidation programs are
  • The confusion between debt consolidation and debt consolidation programs


By the end of the guide, you will have a clear understanding of what to do next with your multiple loans. And make a logical conclusion on how to get rid of your numerous student loans quickly. 


Let’s get into it. 

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What Are Debt Consolidation Programs?

The Debt consolidation program is a service that offers you the opportunity to lower your monthly loan repayments with a low-interest rate. The program combines your multiple loan debts into a single loan debt so that you can quickly pay. When you can consolidate your loans, it means each month you’ll only make one single payment to all the several loans you owe until you clear off your debts. 


Most times, the “service” is a credit organization or company that sends your single payments to your loan lenders. The program can help you limit the stress involved in paying off the multiple loans and the amount of time you waste in paying off your debts.

The Confusion Between Debt Consolidation Loan And Debt Consolidation Programs

The two debt consolidations get confused most of the time. But the terms are entirely different from another. Here are the differences and similarities between the two terms. 

Debt Consolidation Loans

A debt consolidation loan is a new loan you acquire to clear off other student loans 

Debt Consolidation Programs

The debt consolidation program is, however, a service provided by a credit organization. The company negotiates loans, lower the interest rates, and clear your debts off at where your loans are held.   


Even though both are contrary to each other, they have similar functions. Here are they: 

  • They both make one payment as opposed to the multiple payments
  • You may get to pay low on your monthly repayments 
  • They both might take a long time before you finally finish paying your loan debts 
  • You might get low-interest rates, even though you may end up paying more in the overall interest 


So, again, the debt consolidation loan turns your loan debts into a new loan. The debt consolidation programs, which we will get to shortly, offer a service that helps you clear your debts, which is at your loan creditors. If your credit score is good, and you have adequate funds, the debt consolidation loan might be the best alternative for you. 

Types Of Debt Consolidation Programs

There are two broad ways through which you can combine your multiple student loans into a single payment: 

  1. Direct Loan Consolidation 
  2. Private loan consolidation or refinancing

Before we go into details, it’s best to know that the two types of consolidation programs both have their unique qualities even though they have similar functions. We recommend that you take ample time to research and find out which program fits your situation before you make a move. Taking the time to select the right program can save you thousands of dollars, without wasting any more money. But, before you make the decision, let’s find out all about the two consolidation programs. 

Direct Loan Consolidation

The federal consolidation loans allow you to combine your several federal student loans into one big student loan, which makes your monthly payment simple. Combining the loans helps you to make only one payment every month instead of multiple payments. There are numerous benefits from consolidating your loan with a federal loan: 

  1. It combines your federal loans into a single payment monthly, sent to a loan creditor 
  2. If you consolidate with direct loan consolidation, you get several repayment plans from the federal government. An example is the IBR plan. Also, your repayment becomes flexible which helps you to manage your loans and ease the financial burden 
  3. There are absolutely zero fees, which means that you can join any amount without incurring any cost, as long as your debt loans are a federal loan. Direct loan consolidation is free of charge. 
  4. There is a reduction in your monthly payments. However, take note that it can change since debt consolidation can cause higher monthly payments than you had before. In some instances, you can have a lasting debt commitment. 
  5. You can retain your benefits offered to you on your subsidized federal loans. But, it’s not always like that. So when you go in for the direct loan consolidation, you need to investigate whether you qualify for the benefit or not, thus, if you have a subsidized loan. 

In short, the process used for the direct loan consolidation is straightforward and completely free. It can save you thousands of dollars, and get you out of debt. 


The direct consolidation loan is free, so beware of companies that claim they can consolidate your loan for a fee. Anyone who offers to help you in consolidating your federal loan at a cost is not from the Department of Education. You should not engage with them by providing personal information. Thousands of people fell prey to these scams and had lost thousands of dollars and created more problems for themselves.

Is It The Best Idea To Consolidate Your Loan?

There is no straightforward answer. There are several determinants you need to consider before you decide to consolidate your federal loans or not. In fact, even experts cannot give you a definite answer unless they take into consideration many things before they can give you an answer. 


But, the main explanations many people give on why they consolidate their federal loans is the reduction of payments they make monthly. Other reasons are to limit the difficulty in keeping track of their overall outstanding loan debts. 


When you merge your loans into one, you can extend your payments, which will help you save money. But in the long run, your interest will increase, which will cost you even more. So, if you want to find out if the direct consolidation is the best choice for you, examine the options you have, and talk to your loan creditors. When you do that, you’ll know which decision will be better for your finances. 


There are, however, other options such as forbearance, deferment, and forgiveness programs that you can explore. Before you make the final decision, make sure you’ve covered all the available choices thoroughly before you sign up. It’s vital because when you sign up for the direct consolidation program, you cannot revert your decision. 


But, the best way to get an answer is to talk to an expert who will take your case, dissect it thoroughly, and come up with a decision based on what you presented. If your expert is exceptional, you can get the answer, which can be highly beneficial to you. If you need help, we can assist you. Have a free consultation with us, and we will give you the answer, which will help you get out of debt. 

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Eligibility Requirements For Direct Consolidation Loans

You can be eligible for the direct consolidation loan if you have FFEL or Direct Loan. Also, every loan held in grace periods or repayment state qualifies for the consolidation loan, including those in forbearance and deferment. You can consolidate your student loans even if they are default. But you can only do so if you set an agreement terms to repay the loans with your loan servicer. Another way is to accept to pay back the loan with your new direct consolidation loan with any of the IBR plans. That is the ICR plan, IBR plan, or the PAYE plan. 


Please remember that if you have any student loans in the in-school state, it will not qualify for the direct consolidation loan. 


The Direct Consolidation Loan Interest Rate

The direct consolidation loan has a fixed interest rate throughout the student loan’s life.

Loans Qualified For Direct Consolidation Loan

All federal student loans can qualify for direct loan consolidation. Some of the loans include the following:

  • Stafford Loans (subsidized loans and unsubsidized loans)
  • PLUS Loans 
  • SLS Loans 
  • Perkins Loans 
  • HPSL Loans 
  • LDS Loans 
  • FISL Loans 

The loans listed above are not the only ones available for the direct consolidation loan. You can find out from your loan creditor if your loan is eligible for the consolidation programs. Here are some few points to take note: 


  1. You don’t need to get a Direct Loan before you can qualify for the consolidation loan. You can get the consolidation loan if you have FFEL 
  2. It’s possible to consolidate your PLUS loans, but if you do so, the direct consolidation loan will not qualify for the IBR plan. If you proceed with this plan, you will rapidly increase your monthly payment amount. 
  3. You can consolidate your Perkins loans. However, you can do so if the direct consolidation has at least FFEL or Direct Loan.
  4. Direct consolidation loans are for federal student loans only. Private loans are excluded. However, if you have a private student loan, you can consolidate them (we will get to that shortly)


Private Loan Consolidation

Refinancing or private loan consolidation is one of the debt consolidation programs which helps to merge multiple private loans into one loan. But the private loan consolidation is entirely different even though it has similar features as direct loan consolidation. 

How Does Debt Consolidation Work For Refinancing?

Student loan refinancing helps to combine several student loans, federal or private, into a new loan. The loan will have new payment plans, interest rates, and monthly payments. The organization that consolidated your student loans will clear off the old student loans and reinstate a completely new loan with different agreement terms. 


You can save a lot of money if your new student loan has a low-interest rate. However, for you to acquire a low-interest rate, your credit history will have to be good. Your job history, income, credit score, and educational background can determine if you get a low or high-interest rate. Your credit score should be at least 600, with the interest rate from two percent to over nine percent. 


In case you are considering private loan consolidation, you need to acquire the following: 

  1. A minimum credit score of 600 (for a good credit score, get more than 690) 
  2. A constant career 
  3. Pay your student loans on time after you graduate
  4. If by any chance you are not eligible, you can acquire a co-signer with the above features

Should You Refinance Your Student Loan?

There’s no definite answer. Everyone has a different loan. But you can refinance your student debt if you have the following qualifications: 


  1. If you couldn’t make your monthly payments
  2. If you have several private student loans from different loan creditors or the same creditors 
  3. You issued your loans when there was a high-interest rate than now
  4. You had student loans with a variable interest rate which increased or is about to increase
  5. From the time you borrowed your student loan, your credit score has become better
  6. Compared to when you borrowed at the beginning, your income is higher than before. 
  7. You didn’t get anyone to co-sign with you with your previous loans, but you have someone who qualifies to co-sign with you now. 


If you fall into one of the points listed above, you may save a substantial amount of money when you consolidate your loan debt. 

Which Creditor Provides The Best Private Consolidation Rates?

The best loan lender to give you the best rates are those that accumulate a lot of capital together to the extent that they control the borrowing risks of a student. To find out which loan creditor is the best choice for you, discuss with the creditors independently. Compare what they have to offer you and choose the one which will help you save a significant amount of money. 


However, it’s crucial to point out again that you have to be extra careful with scammers, especially if your credit is terrible. Don’t take the risk of getting scammed. 

Drawbacks With The Private Loan Consolidation

There are situations in the refinancing that are not ideal for consolidating. Knowing these disadvantages can help you keep a firm foot when you are making your final decision. Here are some of the situations you need to look at before you consolidate: 

Consolidating Your Student Loans Can Cost You More

If you combine your loan, it might increase in the future, although, ideally, it’s supposed to decrease your payments monthly. But it depends on your circumstances. The main point is that it lowers your monthly repayments so that you can manage your loans. But sometimes, the interest increases, causing additional costs in the future. So even though it might not affect you negatively later in your loan life, it’s still necessary to check if it will affect your future repayments. Better safe than sorry. 

Inconsistent Interest Rates

The consolidation rates determine if the cost of your loan debts will rise or not. With the variable interest rate, your loans go up and come down due to the market rates. So even though the variable rates are cheaper when the market rate falls, you can be in a terrible situation if the rates rise. You may have to pay lots of money to cover your debts in the future. 

Consolidating Both Private And Private Loans May Not Be A Good Idea

With private loan consolidation, you can consolidate your private and federal student loans. Technically, it’s not a bad idea. The downside is that it makes you ineligible for federal loan relief programs, which includes forgiveness programs, forbearance, deferment, and all the repayment plans. 

Consolidating Your Private Loans

To consolidate your private loans, contact the banks, and they will assist you with the process. It involves a lot of paperwork, so you should prepare yourself for that. In the procedure, they’ll let you know which benefit you are eligible for and any other necessary information you need to know.  

How Does Debt Consolidation Work?

For-profit organizations and non-profit credit organizations can assist you in coming up with a plan to get rid of your debts. Here’s how the consolidation programs work.

Begin With Counseling

The initial process of the debt consolidation programs is the counseling. Your loan servicer will discuss with you to let you know if they can assist you and lay everything out for you. The initial step is good because you can ask about the organization and if you don’t like it, you can choose another one. 

Expect To Pay Fees

Yes, some of the organizations are non-profits. But you may have to pay monthly fees and service fees. Compare the costs you are to pay with other organizations before you choose. When you are facing challenges with your finances, every dollar counts. But paying the fees to get rid of your student debt is worthwhile. All you have to do is choose the right organization. 

Keeping up with the updates

In the world of private student loan forgiveness programs, you need to be up to date with the latest news. Whether you are currently eligible, or attending a different school with the same problems, you should check around for regular news or updates. Things could either turn in your favor or against you. There is a high chance that you will see different schools get showered with these new lawsuits. No one knows, it may be your school next. One thing that is for sure is that numerous students across the continental USA are about to hit the jackpot of a lifetime. 

Low Monthly Payments

The debt consolidation programs help you make low payments each month. Most of the money goes towards reducing your loan debts. They might also limit the interest rate to help with the settlement. Your penalty fees may get reverted. Sounds good, right? Of course, there’s a settlement. You have to pay your loan servicer and other costs related.

You Don’t Move Your Accounts

With the debt consolidation programs, your student loans will be at the same place they are now. There’s no new loan, and your loan debt does not move. What happens is that, you make your single monthly payments to your loan servicer, and then they will distribute the payments to your loan lenders. Your loan servicer will communicate with your loan creditor in the initial process and from time to time as it advances.   

Apply for Student Loan Forgiveness Help

If you struggle with university student loan forgiveness, then you should get help with that. Because the employees in these agencies are dealing with the student loans every day and they have enough experience for solving different kinds of student loan problems.

Debt Consolidation Calculator

The consolidation programs can get complicated and challenging to stay on track. That is why the debt consolidation calculator was created to help you determine if the debt consolidation is the right decision you make. All you have to do is to input your credit card balance, outstanding loan debts, and other loan debts. The debt consolidation calculator will calculate your monthly payment. You can adjust the loan types, terms, and even interest rates to get your desired budget and goal. One of the best decisions we recommend before you make your final decision is to use the debt consolidation calculator to evaluate your standings before you consolidate your student loans. 


You can see from the guide you just read that there are several ways to benefit from the consolidation programs. There’s no definite answer on which type of debt consolidation programs to choose. To select the right one, you’ll need to talk to a financial expert to guide you on what to do. Use the debt consolidation calculator to find out if you are in the right standing to use debt consolidation loans. 


Also, beware of scams. You are trying to come out of debt. The last thing you want is to incur more financial burdens. Always use official government sources. If you are dealing with third agencies, choose from only professional services like us. If you want financial experts or loan advisors, our team is always ready to help you out. 


However, If you want to know more about the debt consolidation programs, you can get in touch with us, and we will gladly assist you. You can also take a look at our website for other guides on student loans. We are ready to help you get your financial freedom back.