Student Loan Consolidation Benefits

Written by Nicole Madison
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If you are having trouble keeping up with multiple loan payments and you have one or more loans in default, student loan consolidation may help you out of debt quicksand. Student loan consolidation benefits borrowers who have loans in default status by giving them a way to get back on track. Consolidation is the process of obtaining a loan to combine multiple student loans into one big loan with one monthly payment. Fortunately, you can consolidate defaulted loans as well as loans in repayment status.

Student Loan Consolidation Benefits Borrowers in Default

A student loan is generally considered in default if you have not made payments in 270 days and your lender believes that you are not planning to make any more payments. Being in default can impact negatively on your life. Negative consequences can include denial of future loans, bad credit scores, seizure of tax refunds, wage garnishments, extra fees and interest added to your defaulted loans, and the refusal of your school to release your transcripts.

Consolidating your loans is one way to bring them out of default and get on a more affordable payment plan. If you would like to consolidate your defaulted loans you will need to have your loans placed in repayment status. To do this you will need to contact your lenders and make payment arrangements. After you have made a satisfactory payment plan, you can apply for a consolidation loan. In most cases there is no credit check required for student loan consolidation, so your credit rating will not cause you to be denied.

There are several student loan consolidation benefits that make consolidation an attractive way to get out of default status. Consolidation allows the borrower to lower monthly payments by extending the length of the consolidation loan. Because you have a longer amount of time to repay the loan the monthly payments are usually lower. In addition to lower monthly payments, you can actually save money by consolidating when interest rates are low. Once you consolidate, you will be out of default. This means you will no longer receive collection calls, you can request an income sensitive repayment plan, you will once again be eligible for deferment and forbearance, and you will be eligible for new federal student loans.

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