What are the benefits of student loan consolidation? The benefits of student loan consolidation are:
Benefit 1: Qualify for Loan Forgiveness Programs
Only Direct Loans qualify for the Public Service Loan Forgiveness Program. Loans made under the Federal Family Education Loan Program (FFEL) and Federal Perkins Loan Program do not meet the eligibility requirements for the PSLF Program.
However, you can make them eligible by consolidating them into a Direct Consolidation Loan.
Can my student loans be forgiven if I consolidate? Yes, your federal student loans can be forgiven if you consolidate them. In fact, some of your student loans can only be forgiven if you consolidate.
Benefit 2: Lower Monthly Payments
Most Direct Consolidation Loans are eligible for enrollment in all income-driven repayment plans (IDR plans), such as:
IDR plans can lower your monthly student loan payments by factoring in your income and family size.
FFELP, Perkins Loans, and Parent Plus Loans aren’t eligible for some or all of the IDR plans.
With one exception, consolidating those loans makes you eligible for the income-driven repayment plan that gives you the lowest monthly payment: the Revised Pay As You Earn Plan.
The exception: Consolidation loans that include a Parent Plus loan are, however, ineligible for the REPAYE Plan. Those types of consolidation loans are eligible only for the income-contingent repayment plan, which could bottom out at a $0 monthly payment for large, low-income families.
Benefit 3: Get Out of Default
Consolidation gets your defaulted student loan debt out of default in about 2-3 months. The new consolidation loan pays off the principal, interest, and collection fees owed on the loans included in the consolidation.
There’s no way to get the collection fees waived if you consolidate.
If you’re interested in waiving your collection fees, check out federal student loan settlements or the loan rehabilitation program.