Introduction to Student Loan Consolidation
We’re gathering your questions about all things money and finances. Then, each week, we get your questions answered by the people who know best. This week, Mare from Uptown asked: “I have a student loan. Initially, it was with a servicer that provided good service. In 2022, I applied for Public Service Loan Forgiveness [program] was denied, but in the process, the government moved my loan to another servicer without notifying me. This servicer is the worst — they raised my payments without notice, and whenever I have a problem, I cannot get a human on the phone. I would like to move my loans back to the first servicer, but they said I would need to do a loan consolidation first. I have no idea how to do this, or if it will cost me more money in the long run. Please help!”
Understanding the Frustration
Erika Chavez, student loan counselor at the Consumer Credit Counseling Service of Northern Illinois, said feeling frustrated is a very common experience among student loan borrowers. “The most important thing right now is for you to take back control of your student loans,” she said. “You need to know exactly what type of loans you have and which repayment plan you’re in at the moment so you can make a clear decision that truly aligns with your financial goals.”
What is Student Loan Consolidation?
Chavez said consolidating student loans allows a borrower to combine one or more federal education loans into a new so-called Direct Consolidation Loan, a federal program that gives participants a single monthly payment. The process is free with no additional fees. “It is 100% correct that if you consolidate your loans, you will be able to pick a new servicer,” Chavez said.
The Consolidation Process
The place to start the consolidation process is on the official Federal Student Aid website, studentaid.gov. After signing into your account, look for the loan repayment tab and follow the steps to complete the application. The process takes about 30 minutes, according to Federal Student Aid, and requires: a verified FSA ID, personal details like email address and physical address, financial information such as income details that you can request to be retrieved from the IRS and your loan information such as servicer and loan type.
Using a Student Loan Calculator
“Before you apply, I highly recommend that you spend some time using a student loan calculator,” Chavez said. “It will help you see different scenarios so you can pick the best options for your future.” The federal student aid website has a loan simulator, helping borrowers find the best repayment strategy with estimated payments.
Taking Control of Your Loans
“Taking control also means getting familiar with the website,” Chavez said. “Make sure to check your communication preferences, especially the option to receive text or emails and to check your email regularly.”
Conclusion
Consolidating your student loans can be a viable option to simplify your payments and potentially switch to a more reliable servicer. It’s crucial to understand the process, use available tools like student loan calculators, and take control of your loan information to make informed decisions. By following these steps, you can navigate the consolidation process effectively and work towards a more manageable financial situation.
FAQs
- Q: Is consolidating student loans free?
- A: Yes, the process of consolidating student loans through the federal Direct Consolidation Loan program is free and has no additional fees.
- Q: How do I start the consolidation process?
- A: Start by visiting the official Federal Student Aid website, studentaid.gov, and follow the steps under the loan repayment tab.
- Q: Can I choose a new servicer after consolidating my loans?
- A: Yes, consolidating your loans allows you to pick a new servicer.
- Q: What tools are available to help me decide on the best repayment plan?
- A: The federal student aid website offers a loan simulator to help you find the best repayment strategy with estimated payments.
- Q: How can I get my financial questions answered?
- A: You can leave a voicemail at 312-321-2122 or email moneyquestions@suntimes.com to get your financial questions answered by an expert.
