Federal Loan Consolidation
Matthew Kelly asked:
The average teaching student graduates with over $18,000.00 in student loan debt. After interest is added you could be paying a total of almost $40,000.00, so it is extremely important to make sure you are getting the best deal possible with your loan consolidation. You will probably have both federal and private loans but for this article we will be dealing with only your federal loans.
Grace period –
One of the benefits to a federal student loan is you don’t have to start making payments until 6 months after graduation. Perkins loans have a 9 month grace period. You do still gather interest during this time on your unsubsidized loans so you may want to go ahead and start making payments anyway.
There are a couple programs that offer student loan forgiveness for teachers. With the Stafford Loan Forgiveness program you could be eligible for up to $5000.00 in forgiveness and up to $17,500.00 if you meet certain requirements such as teaching math, science or special ed to low income students. Eligibility doesn’t start until you have taught for 5 years, and there are other requirements such as –
• You must not have had active student loans on Oct 1, 1998.
• Your must be employed for 5 consecutive complete years and your school must have been designated a low income school at least the first year you taught there.
• You are not in default on the loans you are seeking forgiveness for.
Consolidation will not affect the right to forgiveness for Stafford loans.
The Perkins forgiveness program will forgive up to 100%
of your loan if you are:
• a full-time teacher employed in public or nonprofit elementary or secondary schools in districts eligible for ESEA Title I-A funding, where the percentage of children from low-income families enrolled in the school exceeds 30% of total enrollment, or
• a full-time special education teacher in public or nonprofit elementary or secondary schools (including teachers of infants and toddlers) or qualifies professional providers of early intervention services under the Individuals with Disabilities Education Act (IDEA), or
• a full-time teacher of math, science, foreign languages, bilingual education, or other fields determined to have a shortage by the state educational agency.
The Perkins forgiveness loan is forgiven based on the following scheduled:
For full-time teacher
• 15% for each of years one and two
• 20% for each of years three and four
• 30% for year five and each successive year
For full-time special education teacher
• 15% for each year of service
Perkins loans are not eligible for forgiveness if they have been consolidated.
In addition you may be eligible for forgiveness by state. Check for the availability in your state here.
Once you have decided if you will be eligible for forgiveness or not it’s time to start making those payments. A federal student loan consolidation can help you do that more affordably by extending your repayment term and lowering your payment and interest rate. Compare the terms of several consolidation companies and choose the one who will save you the most money and has the best customer service. It can be hard to compare different types of repayment incentives programs so ask for the bottom line – how much will you be paying in total interest. The company should have actual people available to answer your questions and they should be courteous and knowledgeable. You have many choices in lenders pick one that will deliver for you.
You must give up what is left of your grace period when you consolidate so if you aren’t ready to start making the payments time it so your consolidation is funded right at the end. Generally a consolidation takes 4-6 weeks so you should have your company picked out and an application underway by about 4 months after graduation..
Repaying your student loans can be a daunting task but with a little forgiveness and the help of a good student loan advisor we can take some of the sting out of it. As always, go to annualcreditreport.com to get a free annual credit report to check if there are any negative items on your credit report.