Your loan can be forgiven after you make payments for 20 to 25 years with an income-based repayment plan. Consolidating to a longer loan term can be costly. Consolidation Could Raise Your Interest Rate. Unpaid interest is added to your balance.
Consolidation is a way to make repaying student loans more manageable and possibly less expensive. You combine all your student loans, take a big consolidation loan, and use it to pay off all the others. You have one payment left to a lender every month. Federal Loans Can Be Consolidated in Direct Loan Consolidation Loan Program.
You combine all federal student loans into one loan that has a fixed interest rate. That rate is obtained by taking the average interest rates of all federal loans and rounding the rate to the nearest eighth of a percentage. If you haven't made payments because you're having difficulty keeping up with multiple loan servicers and multiple payment dates, consolidation or refinancing is a valid option. Making one payment every month instead of many makes life easier.
Consolidating your federal loans is a strategic step to help you manage your debt. If the repayment term is extended, your monthly payment will be lower, but you will pay more interest over time. When you apply for a Direct Loan Consolidation Loan, you have the opportunity to choose new repayment terms for your loans. Having a long term of 20 or 25 years can lower your monthly payments, but it also means you'll pay more interest in the long run.
PSLF Forgives Federal Student Loans After 10 Years of Working in Public Service. But if you consolidate your loans, you reset the time of your repayment term, even if you've already been on an income-based repayment plan for a few years. In addition, you can choose new payment terms, usually between five and 20 years. If you change your terms, you'll adjust your monthly payment, allowing you to pay an invoice that fits your budget.
You can choose between fixed and variable rates. Fixed interest rates are 2.99% to 8.24% APR (2.74% to 7.99% APR with Auto Pay Discount). Initial variable interest rates are 1.99% APR at 8.24% APR (1.74% to 7.99% APR with autopay discount). Variable rates are based on an index, the 30-day average secured overnight funding rate (SOFR) plus a margin.
Variable rates are reset monthly based on index fluctuation. We currently do not offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX and VA. Fixed rates range from 3.49% APR to 7.99% APR with an autopay discount of 0.25%. Variable rates from 1.74% APR to 7.99% APR with an autopay discount of 0.25%.
Unless they are required to be lower to comply with applicable law, variable interest rates on 5, 7 and 10 year terms have an APR limit of 8.95%; 15 and 20 year terms have an APR limit of 9.95%. Your actual rate will fall within the range of rates listed above and will depend on the term you select, your creditworthiness assessment, income, the presence of a co-signer, and a variety of other factors. The lowest rates reserved for the most creditworthy borrowers. For the variable rate product SoFi, the variable interest rate for a given month is obtained by adding a margin to the 30-day average SOFR index, published two working days before that calendar month, rounded to the nearest hundredth of one percent (0.01% or 0.000.
APRs for variable rate loans may increase after origination if the SOFR index increases. SoFi's 0.25% AutoPay Interest Rate Reduction requires you to agree to make monthly principal and interest payments through an automatic monthly deduction from a savings or checking account. This benefit will be suspended and forfeited for periods when you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate, but it doesn't change the amount of your monthly payment.
This benefit is suspended during periods of deferment and deferment. No automatic payment required to receive a loan from SoFi. Before you apply for student debt consolidation, be sure to ask the servicer if you will lose any benefits. Whether you choose federal loan consolidation or private loan consolidation depends on the type of loans you have and your comfort level with its benefits and drawbacks.
Consolidating your student loans can help simplify the repayment of your student loans, since you only have to manage one monthly payment. When you apply for a Direct Loan Consolidation Loan, you bundle your federal student loans into a new one. It means you can consolidate your private and federal loans with a private bank, credit union, or online lender. Refinancing or consolidating private and federal student loans may not be the right decision for everyone.
The circumstances under which you can consolidate a loan or loans that have already been consolidated are limited. If you have already been pursuing PSLF for a year or more, be careful not to lose your progress in consolidating student debt. One of the biggest benefits of student loan consolidation is that you keep your federal student loans with the federal government. So, if you plan to consolidate to simplify repayment, remember that your private student loans will not be combined with federal ones.
Consolidating with a private loan with refinancing could mean that you will lose those protections and opportunities under the terms of the new loan. According to the Department of Education, if you consolidate your student loans, you will lose credit for payments already made through public service loan forgiveness (PSLF) or income-based repayment plans, such as income-based repayment. Finally, Perkins loan recipients may no longer be eligible for Perkins loan forgiveness if they consolidate. Because Direct Loan Program Consolidation Loans have a fixed interest rate, if any of the student loans you are consolidating have a variable interest rate, by undergoing consolidation they will essentially become fixed-rate loans.
The repayment term for a Direct Loan Consolidation Loan is up to 30 years and depends on the amount of the consolidation loan, your other student loan debt, and the repayment plan you choose. Find out the pros and cons of consolidating student loans and how to choose which one is best for you. . .