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If you, like many Americans, have multiple types of federal loans there is yet another option called a Direct Consolidation loan. The benefits of consolidating your loans include the fact that you would have only one payment to make a month and you would have a lower monthly payment because you would have 30 years to repay the loan. Of course, if you were to choose this option you would make many more payments and would end up paying a lot more interest. In addition, you could lose the benefits that came with your original loans such as deferment and those repayment options. Also, not all federal loans are eligible for consolidation. Here are the ones that are:
• Direct Unsubsidized Loans
• Direct Subsidized Loans
• Unsubsidized Federal Stafford Loans
• Subsidized Federal Stafford Loans
• PLUS loans from the Federal Family Education Loan (FFEL) Program
• Direct PLUS Loans
• Federal Perkins Loans
• Loans for Students (SLS)
• Federal Nursing Loans
• Health Education Assistance Loans
• Some existing consolidation loans
Whatever you do don't default
The sad fact is that about 15% of people with student loans go into default within the first three years. Whatever you do, don't let this happen. You are literally in default the day after you miss a payment. However, this won't be reported to the three credit bureaus until you've been in default for 90 days. When this happens your credit score will take a serious hit. Plus, your account could actually be turned over to a debt collector and trust us, you don't want this to happen. Student loan debt collectors can literally make your life a living hell. They can garnish everything from your tax returns to Social Security payments and from wages to disability checks. If you default on a loan you can also be barred from the military, lose professional licenses and suffer other serious consequences. And if any of your loans do go into default you will be hit with extra fees and interest charges and will end up owing even more.
Send Sen. Tom Harkins a thank you note?
You may not be aware of this but it's all but impossible to get student loan debts discharged through bankruptcy. If you owe $25,000 on student loans, you owe $25,000 on student loans and there's not much you can do except repay the money However, Sen. Tom Harkins recently introduced a bill that would allow people who have student loans from private lenders to get them discharged through bankruptcy. This is only a small percentage of those who have student loans – like 10% to 15%. And the bill is unlikely to get passed until after the midterm elections. However, if you have a boatload of private loan debt, there may be help on the way.