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Consolidation And Loan Forgiveness Programs

Article on Consolidation And Loan Forgiveness Programs

Student loans are usually taken each year to help pay for school tuition as well as room and board. Six to nine months after graduation, repayment must begin. This can be a very stressful time for the new graduate, especially if a good paying position has not yet been obtained. However, two ways to lessen the load of loan repayment is through consolidation and loan forgiveness programs.

What Loan Consolidation Means

Each school year, a new loan is taken for education. If the student takes a loan all four years, they will have four student loans to repay upon graduation. It is usually easier to repay the debt if all four loans are consolidated. The consolidation loan lender pays off all four loans and grants one large loan in the amount of the separate loans. There are no fees associated with consolidation and loan forgiveness programs, the student can choose the lender for the consolidation, and the repayment schedule can be stretched farther than with the original loan.

How It Works

Booth unsubsidized and subsidized loans can be consolidated into one loan. However, any unpaid interest on an unsubsidized loan at the time of the consolidation will be added to the principal. When a consolidation loan is taken, the interest rate does not depend on current market rates, as with other loans. The interest rate for the new loan is the weighted average of the individual loans and is a fixed rate. This takes into account both the original loan amounts and interest rates.

Qualifying for Consolidation

All federal loans and most private student loans can be consolidated. Both parents and students can consolidate student loans. Keep in mind that parent and student loans cannot be a part of the same consolidation loan. The loans must be in the repayment period in order to consolidate. They can be consolidated if still attending school but on a part time basis.

What is Loan Forgiveness?

Loan forgiveness programs essentially dismiss money owed on student loans. There are many different criteria to be eligible for these programs. Most require volunteer or military work or having a job in a certain field. However, permanent disability and loan discharge programs are also available. Loan discharges are for students whose schools closed or performed certain actions in opposition to typical loan procedures such as failing to pay the student a refund.

Who Offers Loan Forgiveness?

The federal government has three main forgiveness programs:

• Teacher Loan Forgiveness for those that teach at a low income school
• The Civil Legal Assistance Program for those that work as civil legal assistance attorneys
• Public Service Loan Forgiveness if the graduate works for ten years in a public service occupation including government, public health or safety, librarians, and child care or public education.

Volunteer organizations such as the AmeriCorps as well as the Army National Guard offer loan forgiveness and other loan assistance plans. Many schools, state governments, and other organizations such as the National Institute of Health have loan forgiveness programs, mainly centered on legal and medical professions.

Consolidation and loan forgiveness programs are great opportunities to reduce the amount of money coming out of a graduates pocket for student loans every month. There are many consolidation and loan forgiveness programs being formed each year to help students after graduation.