Consolidate Student Loans In Default

Consolidation

If you have student loans, chances are you’ve heard about the different options to consolidate them. If not, then here’s a quick summary. There are three types of consolidation: federal loan repayment programs, private debt settlement companies, and bankruptcy. Each option comes with its own set of pros and cons. Federal consolidation programs allow you to join together your federal loans into just one monthly payment, which makes payments more affordable. However, they only cover certain loans. Private consolidation companies offer services similar to those offered by federal programs; however, their fees and requirements vary throughout the country. Finally, bankruptcy offers no upfront fee, but can be expensive depending on what you want to accomplish. When choosing between consolidating and not, consider the following:

Federal Programs:

Loan forgiveness program: You may be able to get loan forgiveness if you participate in any of these federal programs.

Income-driven repayment plan (IDR): Your interest rate will decrease each year until it reaches 0%—at which point you pay nothing.

Private Debt Settlement Companies:

No upfront costs: These companies charge no fees in exchange for helping you solve your financial problems.

Fee based: Fees range anywhere from $99-$299 per month.

Bankruptcy

No upfront cost: Bankruptcy is free, but it does require some work from you.

Repayment plan: After filing for bankruptcy, you must follow a strict repayment plan.

Consolidate Student Loans In Default

I have consolidated student loans, and I want to consolidate them in default. I’m currently working on paying off my principle balance (about $20,000) by making monthly payments. I need help consolidating these loans in default. Can anyone give me advice?

Thank You!

-Cherie

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Consolidate Student Loans In Default

Consolidation Loan Services

Consolidating student loans in default means that you have already failed at least one repayment plan. If you find yourself facing a situation where you have missed payments many times over, then it might be time to consolidate your debt. When you file for consolidation loan services, the lender will work with your creditors to lower your monthly payments. You may not even need to make any type of payment for a period of time until your current loans are paid off. Once they are paid off, you will receive a single set of payments from the lender instead of several different ones.

Private Debt Counseling

Private debt counseling is a service offered by private companies that will help students who have declared bankruptcy. These services allow consumers to contact them and discuss their options with regards to consolidating student loans in default. Most people do not realize that these services exist. Sometimes, it is difficult to tell if you qualify for one of these programs, especially if you have never filed for bankruptcy before. Students should always seek professional advice first before considering filing for bankruptcy.

Bankruptcy Options

If you want to consider filing for bankruptcy, then you have two options available to you. You can either file for Chapter 13 bankruptcy or Chapter 7 bankruptcy. Both types of bankruptcy require a debtor to submit a petition to the court along with forms and schedules that detail their financial information.

Chapter 13 bankruptcy requires a debtor to file a three-year repayment plan; however, after the three years are over, the debts are discharged. Chapter 7 bankruptcy allows a consumer to eliminate all of their debts by wiping them out completely. This would mean that you would no longer owe anything to anyone. It does not matter how much money you owe when you file for Chapter 7. All of the debts are erased.

Student Loan Repayment Plan Options

The loan repayment plan option varies depending on what type of loan you have. The federal government offers three types of plans. There is the standard 10-year repayment plan, the 5/10 plan, and the 3/5 plan. Each has its own advantages and disadvantages.

With the standard plan, you will repay ten years worth of interest and principal. At the end of 10 years, you will pay nothing more. However, you will still owe the original amount of money that you borrowed. Your monthly payments will increase each year as long as you continue making payments. After five years, you will start paying back only half of the total amount that you originally borrowed. After ten years, you will begin to pay back only 25% of the total amount.

For the 5/10 plan and 3/5 plan, you can choose to make smaller payments throughout the entire term of the loan. You will not be able to stop making payments after a certain number of months. Instead, you will make minimum payments throughout the three to five years. If you fail to meet the minimum payment requirements, then you will not lose any of the accrued interest on the unpaid balance.

All of these options have pros and cons. Students who are in good financial situations should consider the standard plan. Those who are struggling financially should look into the repayment plan options. For example, the 3/5 plan is great for those who have been laid off and cannot afford to take time off to go back to school.

Consolidate Student Loans In Default

The Student Loan Servicing Center is committed to helping borrowers consolidate their student loans in default. Our loan consolidation programs provide options for managing your monthly payments, lowering interest rates, reducing fees, and saving money on repayment.

If you have not been keeping up with your student loans, you might want to consolidate them before they go into default. Contact us today at 1-855-LENDUS (877-382-7722) to learn whether a loan consolidation program would benefit you.

If you’re currently in default on your federal student loans, we work with lenders to help refinance. If you have private student loans, we help you get rid of those, too! We may even take over your accounts if you decide you don’t need to pay anymore, though you’d still owe any remaining balance on the original loan terms.

We offer our services to military members and veterans, too. That means you could save thousands in taxes and reduce your burden during retirement by consolidating your debts now.

In addition, we can set up automatic payment plans for existing loans to lessen your financial burden while you’re trying to make ends meet. You’ll only have to worry about one repayment schedule to keep track of instead of several. Best of all, many of these plans don’t require you to make additional payments until after you graduate. So you won’t have to wait years to repay your debt.

Even if you believe your current lender is handling your situation correctly, you should consider consolidating your student loans. Many lenders will give you a break if you do. And the longer you leave your debt unpaid, the harder it becomes to discharge.

For example, if you consolidate your Federal Direct Stafford Loan and Private Consolidation Loan of $25,000 each under the William D. Ford Direct Loan Program, your total amount that you owe will drop to about $16,300. Your monthly payments will fall from $320 per month to $200 per month. That’s a savings of $120 per month.

Consolidate Student Loans In Default

Consolidate student loans in default

If you have already defaulted on your federal student loan payments, you can now consolidate them at lower rates while maintaining your current payment plan. If you want to start repaying your student loans earlier than planned, it’s best to get some help. You may qualify for a deferment or forbearance on your student loan debt if you have good reasons for missing a payment.

Repayment length

Generally, a repayment period should last 10 years. However, if you extend the term of your loan, you could pay back the principal sooner. There is no rule that says you’ll pay off your student loans faster simply by extending your repayment term. The interest rate on your student loan will determine how long it takes to repay the principal.

Interest type

There are several types of interest you can incur on your federal student loans including subsidized (0% interest), unsubsidized (8%), and direct (12%). Each type of interest has its own minimum monthly payment amount. Unsubsidized student loans are often referred to as “pay-as-you-earn” plans since they allow borrowers to make their payments based on what interest accrues on their loans. Direct student loans are paid out of pocket and therefore do not adjust automatically with changes in income.

Payment options

You can choose between fixed and variable payments when you set up a repayment plan. Variable payments fluctuate depending on future earnings. Fixed payments stay the same regardless of how much your financial situation changes over time. You would generally make higher payments under a variable plan due to the potential for greater fluctuations in your income.

Income-based repayment

Income-based repayment programs let you use the income you make after graduation to repay your student loans. These programs require that you either work for the government or enter public service for a certain number of hours annually. Your payments are then adjusted to account for any additional income you earn. For instance, if you make $30,000 a year and owe $50,000, your payments would be determined using a formula known as Pay As You Earn (PAYE) rather than the standard 10 percent of discretionary income (DISC). The Department of Education offers two types of income-based repayment plans: Public Service Loan Forgiveness and Revised Pay As You Earn. For more information on these programs, visit www.studentaid.gov/repay.

Monthly payment amount

The monthly payment amount on your student loan is dictated by your original loan balance, the interest rate, and the number of months left until you begin paying off your loan. To calculate your monthly payment amount, multiply the total amount owed by 12 and divide by the term of the loan. For example, a borrower who owes $35,000 and wants to repay her loan over a period of 24 months would need to make a monthly payment of $504 ($35,000 x.12 $420; $420 / 24 $16.67 per month).

Debt forgiveness

Debt forgiveness programs are designed to aid those who cannot afford to make payments and are suffering from economic hardship. Generally, a borrower qualifies for debt forgiveness if she makes 120 qualifying payments, works in public service for five years, or if she is enrolled in a public service loan forgiveness program. A few states offer their own programs, including California, Florida, Illinois, Iowa, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, and Wyoming.

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