Consolidating fafsa loans
If you want to consolidate a defaulted loan, you have to either make satisfactory repayment arrangements on the loan with your current loan servicer before you consolidate, or repay your new Direct Consolidation Loan under the: The interest rate for federal loans is set according to a formula established by federal statute.The fixed rate is based on the weighted average of the interest rates on the loans at the time the borrower consolidates, rounded up to the nearest 1/8%. The consolidation rate is fixed for the life of the loan, which protects the borrower from future increases in variable rate loans but does now allow them to benefit from future decreases in variable rates.For example, under the Public Service Loan Forgiveness Program (PSLFP), your Direct Loan balance may be eligible for forgiveness after 120 payments if you’ve worked in the public sector that entire time.Similarly, the Teacher Loan Forgiveness Program is available for teachers who work in schools that serve low-income families full-time for five consecutive years.The interest rate on consolidated loans is often lower than what is currently paid.Borrowers in default on a federal student loan are eligible for a consolidation loan if certain conditions are met.
But before you dismiss the idea of refinancing, you should first take a look to see if any of these benefits apply to you.Read the other posts in the series here—and get all the info you need to make intelligent decisions about your student loans.And while you’re at it, check out So Fi’s new Student Loan Debt Navigator tool to assess your student loan repayment options. With prevailing interest rates at historic lows, some private lenders offer rates that are significantly better than a high-rate federal loan.Loan consolidation can simplify the loan repayment process by allowing the borrower to combine several types of federal student loans and repayment schedules into one.The repayment process is simplified because there is only one per month.