Student Debt Relief Options | The Right Way To Consolidate Your Student Loans

To say student loan debt is a problem in our current cultural climate would be an understatement. In 2016, the average amount of student debt for bachelor’s degree recipients was $30,100 per borrower, which is double what it was 20 years ago, even after adjusting for inflation. And considering the fact that the job market for recent graduates has been poor, this is a huge problem, and many recent grads are struggling to find well-paying jobs to pay off their loans.

Fortunately, there are many options to help you get out of student debt faster, potentially leading to thousands of dollars in savings.

What are debt relief options?



There are essentially 2 types of debt relief options—student loan refinancing (also known as private loan consolidation) and  federal loan consolidation


What is student loan refinancing and is it right for you?


If you are tired of paying high interest rate payments every month and would like to get out of debt faster, choosing student loan refinancing could be the best financial decision you ever make. Refinancing combines all of your current loans with a new loan. Depending on a wide range of factors, the interest rate on your new loan can be substantially lower, and there are many scenarios in which the interest rate can drop from as high as 7% to 2.5%, saving you a significant amount of money.

Student loan refinancing helps you to take all of your loans and lumps them into one manageable monthly payment. For example, if you have 4 private loan payments to keep track of each month, it can be overwhelming and stressful. With student loan refinancing, you will essentially be taking out one big loan to pay off all of your smaller loans, leaving you with only one monthly payment to keep track of, often times with lower interest rates.

With student loan refinancing, you may be able to:

  • Lower your monthly payments
  • Decrease your loan term so you can pay off your debt sooner
  • Decrease your total interest to save you money
  • Pay off your loans quickly with a variable interest loan
  • Simplify your payments with one monthly bill



How to qualify for lower interest rates with student loan refinancing



Credit companies want to limit their risks, and through their screening process, try to determine if you are likely to follow through on payments. As a result, they will want to know your education and job history, current income, and financial background. Typically, to qualify for low interest rates, you will need to:

  • Have a steady income and a credit score in the mid-600s, or
  • Have access to a co-signer with good credit.


Can you postpone payments when refinancing?


Yes, many private refinancing companies offer protections to help protect borrowers in times of hardship. You will have to show proof of lost income or unemployment, and depending on the lender, you can receive up to 12 months forbearance, giving you time to find a job and get your life back on track.


Can you refinance a federal student loan with a private student loan refinancing?


Yes, you can choose to refinance your federal student loans into a private loan. However, if you choose to do so, you will lose access to many protections associated with federal loans, such as interest-free deferment on subsidized federal loans, income-based repayment plans, and federal loan forgiveness programs.


Step-by-step guide to student loan refinancing





If you are considering student loan refinancing, you should shop around for a student loan refinancing company that is a good fit for you. Different companies have different benefits, so it is important to compare options before committing to a company. Fortunately, if you would rather not spend hours researching, we have done the research for you.

We have found a special service called the student debt relief hotline to be a great choice for student debt refinancing and consolidation, and highly recommend their services. They are a special service that will connect you with student debt relief experts to help you create the best plan possible for getting out of debt. They can be reached at 877-271-6514. There is literally no risk to call and they offer a 100% free consultation to go over your options.

What I tell my friends and family is that calling to inquire literally costs nothing, but it could save thousands of dollars, so why not give them a call at  877-271-6514.



What is federal student loan consolidation?


The other type of student loan service is federal loan consolidation. Loan consolidation is the process of taking multiple loans and placing them into one easy-to-manage loan. For example, having 5 different monthly loan payments can be overwhelming. As a result, taking out a consolidation loan to pay off all of the smaller loans, so that you only have one monthly payment instead of 5, can be a great way to minimize stress and make payments more manageable.

Although there is private loan consolidation, which is explained in more detail below, federal loan consolidation is the process of taking multiple federal loans and placing them into one easy-to-manage student loan.

Federal loan consolidation is done through the Department of Education, and helps many borrowers become eligible for federal loan repayment programs. However, unlike student loan refinancing, federal consolidation does not save borrowers money.


Federal consolidation benefits:



  1. You can gain access to repayment plans and forgiveness programs


The government offers many great tools and programs to help borrowers pay off their student loans. For example, loans that are part of the government’s Direct Loan Program qualify for both the Public Service Loan Forgiveness program and the Pay As You Earn income-based program.


Additionally, many borrowers who have acquired loans through the Federal Family Education Loan program, also known as FEEL, become eligible for income-contingent repayment plans with federal loan consolidation.


If you are a parent borrower and have PLUS or Direct PLUS loans, consolidating your federal loans can be the only way to qualify for income-based repayment plans.

  1. Get out of default


If your federal student loan is in default, choosing to consolidate will reinstate your ability to qualify for deferment, forbearance, loan forgiveness programs, and other federal loan benefits. To qualify for default recovery you must:

  • Choose an income-driven repayment plan, or
  • Make 3 consecutive, punctual monthly payments prior to consolidation


  1. Simplify your payments


When you choose to consolidate your federal loans, it will simplify your monthly payments by lumping all of your payments into one. This is ideal for those with multiple federal loans. For example, if you have 3 federal loan monthly payments, consolidation will allow you to make only one payment to one service each month.


Downside to federal loan consolidation



  1. More than likely, your interest rates will be higher


There are a few reasons this will increase your interest rates.

Because consolidation interest rates weight the averages of your previous interest rates and round them up to the nearest ̢ɉۼ of 1%, they will be slightly higher.

Additionally, by consolidating your federal loans, you will more than likely extend your repayment terms, which will cause you to end up spending more over the duration of your loan.

Lastly, if you have any unpaid interest on the loans you are consolidating, this will be added to your prinicipal balance, which is known as capitalization. This causes you to pay interest on top of your interest, further increasing the total amount of interest owed.


  1. You will have to start over if you have made any progress towards Federal Loan Forgiveness


Federal loan forgiveness programs are a great way to get out of debt. Typically they work by requiring borrowers to make 120 consecutive payments while working for a either a nonprofit or a government entity. If you decide to consolidate your federal loans, you will need to start over. For example, if you have made 28 payments for the Federal Loan Forgiveness program and then decide to consolidate, you will have to start over, and make an additional 120 consecutive payments to qualify.


  1. You won’t be able to take part in certain repayment terms and loan types


Many borrowers have federal loans, such as parent PLUS loans. If you have a parent PLUS loan, you should consider consolidating your federal loans and PLUS loans separately. If you decide to consolidate them together, you may lose the ability to qualify for income-based repayment plans, Pay As You Earn, and Revised Pay As You Earn.

Furthermore, if you have a Perkins loan, you should consider keeping it separate to qualify for the Perkins loan cancellation option.



How do interest rates work with federal consolidation loans?


If you decide to consolidate your federal student loans, your loans will be paid off by the government and replaced with a direct consolidation loan. This service is free, and if a company charges you fees, it is a red flag to look elsewhere.


When you consolidate your federal student loans, your fixed interest rate will be weighted and rounded up to the nearest ̢ɉۼ of 1%. For example, if your weighted interest rate average comes out to 5.25%, it will be rounded up to 5.375%.


Furthermore, if you choose to consolidate your federal loans, your new loan term will be between 10 to 30 years, with the repayment term starting within 60 days of the disbursal of your consolidation loan.


Look below for repayment terms for federal consolidation loans:


Total Federal Loan Direct Consolidation Loan Repayment Term
Less than $7,500 10 years
$7,500 to $9,999 12 years
$10,000 to $19,999 15 years
$20,000 to $39,999 20 years
$40,000 to $59,999 25 years
$60,000+ Greater than 30 years


Step-by-step process to consolidating federal student loans:

  1. Go to
    • Log in with your Federal Student Aid ID.
    • Click “Complete a Consolidation Loan Application and Promissory Note” under the “repayment and consolidation” tab.
  2. Decide which loans you want to consolidate
    • You can choose to consolidate only some of your student loans or all of them.
    • Remember, if you have a Perkins loan, choosing to consolidate it will cause you to lose access to Perkins loan cancellation. Additionally, if you are a parent with PLUS loans, choosing to consolidate them separately from your others loans may be something to consider. because consolidating your PLUS loans together with your other federal loans will prevent you from qualifying for most income-driven repayment plans (all except income-contingent repayment).
  3. Decide on a student service provider
    • There are 4 options to choose from: FedLoan Servicing, Nelnet, Navient, and Great Lakes Educational Loan Services Inc.
  4. Choose a repayment plan
    • There are many repayment options to choose from. There are 10-30 years plans, 4 income-driven plans, and more. Before choosing, it is highly recommended you use the repayment estimator on the website to see what you’d be paying on each of the different plans.
    • If you decide on an income-driven repayment plan, you will need to submit your most recent federal tax return after completion of the application.
  5. Complete the application
    • At this point in the application process, you will be prompted to fill out basic information and list two references. Next, you will sign and submit the application. Until it is processed, you will be required to continue making payments on your existing loans.
    • Choosing to consolidate your federal loans is something that cannot be undone, so it is imperative you know the pros and cons thoroughly before proceeding.


Take the first step.

Whether you are interested in student loan refinancing, or federal consolidation, getting started can be difficult, and it is important you make sure you understand both the advantages and drawbacks of student loan services before committing. To get started with federal loan consolidation, take the first step and fill out the application here at Or if you are interested in private loan refinancing services, take the first step and call the student debt relief hotline at 877-271-6514.