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Is it possible to consolidate school loan debts to lower my payments?
I graduated college in 2008. Since there are no jobs out there, I’ve decided to go to graduate school. However, I’m worried about my school debt. I have a number of student loans, a few of them, which I took out years ago, at higher interest rates than you find now. Am I correct in thinking that I have a legal right to consolidate my school loans and lower my payment?
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I owe around $7,500 on one credit card, $15,000 on a second, and $8,000 on a third. I’m having trouble making the payments. Should I consider cons...This site does not provide legal advice and users of this site should not interpret any of the information presented here as legal advice. The information provided merely conveys general information related to commonly asked legal questions. We are not a law firm and the employees responding to questions are not acting as your legal attorney. You should ultimately consult with a Lawyer for your case.
Answers
You’re mostly right. There is no legal “right” to consolidate debt, including school debt. However, there are programs that will help you do this. In particular, there are federal programs under student or school loan consolidation is subsidized for lenders, to make it more attractive (and therefore likely!) for them to offer consolidation.
The advantages of federal consolidation are several:
There is a significant caution with any sort of loan consolidation, including federal consolidation: it’s a one-way street. That means that once you consolidate loans, you cannot go back and “unpack” or unconsolidated them. (That’s because the original loans are paid off with the consolidating loan—they no longer exist.)
If you extend the repayment time, while you will reduce the monthly payment, you will increase the total interest you will pay over the lifetime of the loan.
You can’t pay the loan off “piecemeal,” knocking down principal and interest, the way you can when you have several smaller loans, which you can focus on paying down one at a time (assuming you have the ability to pay extra towards principal). It’s all or nothing, since the individual loans are replaced by a single large consolidation loan.
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Posted by Steven Sweig on 28 Apr 2010
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