Talk to a Professional

Before you get started on actively reducing your student loan debt, it's best to consult a professional.


If you have federally issued Direct loans, you can get advice about your individual options directly through the Department of Education's by logging in on their Federal Student Aid site and accessing your account information.

You may also want to talk to a financial aid counselor at your school. Even if you graduated a long time ago, they should still be available to give you sound advice.

For privately issued loans, contact your lender and ask to speak with an advisor. Even a customer service agent should be able to provide you the details about your loans and any options for changes in your interest rates or repayment schedule.

And whether you do your own taxes or have them done by a professional, you may want to talk to someone about making sure you are deducting your student loan interest accurately.

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Step 1: Assess Your Debt

Your first step in reducing debt is understanding it.


Ask yourself the following questions before proceeding:

Are your loans federal loans or private loans? (i.e., Were they issued to you from the government or a private bank or lender?) To learn more about specific types of loans, go to FinAid's student loan explanations.

Note that your federal loans are generally fixed at a relatively low rate, while private loans calculate interest using a variable rate that depends on your credit and current rates.The New York Times: Try Shopping Around for Student Loans (May 2, 2007)1

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What kind of loans do you have, e.g., Stafford, PLUS, Perkins? Are your loans subsidized or unsubsidized? (A subsidized loan, which is need-based, does not require you to make interest payments while you are in school. On an unsubsidized loan, interest accrues while you are in school whether you are repaying the loan yet or not.California State University Sacramento: Subsidized vs. unsubsidized loans2)

How much debt do you have? Across how many lenders?

Are you currently in a grace period before repayment begins?

What is your repayment period (i.e., are you scheduled to pay off your loans in 10 years? 15?)

What interest rates are you currently paying on your loans?

To learn more about your individual federal loans, you can go to the National Student Loan Data System and look up your loan information using your social security number and other personal information.

-Before accessing this info, however, you'll need to sign up for a PIN number if you don't have one already.

To learn about the differences between federal loans and private loans, Student Loan Borrower Assistance hosts a series of introductory guides on understanding how student loans work.

Another great resource for understanding your student loans is Simple Tuition, which not only provides detailed information about various loans and their options but allows you to comparison shop for consolidation offers or new loans.

Research your private loans on your lender's website (almost all lenders will allow you to manage your account online with a user name and password), and bookmark the site for future reference.

Once you've collected all the pertinent information, read over FinAid's student loan checklist to keep your various loan details organized and in one document.

How to Reduce Student Loan Debt

Introduction


Generally easy to get and seemingly "justifiable debt" (it's not like you're buying an enormous flat screen tv on your almost-maxed out credit card), educational loans are still causing serious struggles among new graduates. The student loan industry has come under criticism for misleading students about the realities of repayment amidst soaring interest rates. As college costs continue to rise, however, students are taking out bigger and bigger loans. If you are one among many former students trying to reduce what you owe on your existing student loans, there are steps you can take to lower your payments and reduce your overall debt. Read on to learn the specific steps to handling your situation intelligently.

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Resources for How to Consolidate Student Loans

Federal Student Aid: National Student Loan Data System


FinAid: Student Loans

Simple Tuition: Financial Aid and Student Loan Resource Center

Simple Tuition: Consolidate Private Loans

Federal Student Aid: Loan Consolidation Information Center

Student Borrower Assistance: A Resource for Borrowers, their Families and Advocates

FinAid: Student Loan Consolidation

FinAid: Loan Calculators

Federal Direct Consolidation Loans: Online Calculator

Christian Science Monitor: "Time to Consolidate Student Loans" (May 14, 2007) :WARNING: Pop-ups.

USA Today: Consolidate Student Loans Only if It's Right for You WARNING: Pop-ups.

The New York Times: Times Topics: Student Loans

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Step 3: Consolidate Your Private Loans

It is possible to consolidate private loans, as well, and this may be worth doing if your credit score is higher now than it was when you took out the loan.


You may be able to consolidate your loan with your original lender. It might be best to start there to see what rates may be available to you.

If your lender is not offering a consolidation rate that is appealing, you'll need to comparison shop to find the best consolidation offer.

Note that private consolidation loans are based on your credit score, and/or that of your co-signor's. You may get a lower rate if you apply to consolidate with a co-signor who has excellent credit.

Be sure to research any associated fees before you determine that it is financially advantageous to consolidate your private loans.

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Step 2: Consolidate Your Federal Loans

Consolidating your federal loans means you will pay one monthly bill and will determine a fixed rate for the life of your loan. This rate is generally lower than that of a private consolidation offer.


To determine your consolidation rate for your federal loans, a lender will calculate a weighted average of your current loan rates and then round up to the nearest 1/8, but not to exceed 8.25%.

Calculate your potential consolidation rates using FinAid's consolidation calculator.

Your interest rate also depends on the type of federal loans you have and when you took them out.

You can lock in a lower consolidation rate by consolidating during your grace period (the several months immediately after graduation, during which most lenders will not force you into repayment). Consolidating during your grace period, while ultimately helpful because your interest rate is lower, does force you into immediate repayment, even if you still had a few months left before scheduled payments were to begin.

Because Stafford loan holders who graduated in 2007 or after will pay fixed rate interest, it's not as clear that they should consolidate as it has been in the past.

Note you cannot consolidate loans if you are currently in school.

It is not recommended that borrowers consolidate federal loans into a private loan because you will lose important privileges to defer, apply for a forbearance, or qualify for loan forgiveness under government programs.

And under no circumstances should you pay a fee to consolidate your federal loans.

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Step 1: Decide Whether to Consolidate

There are pros and cons to consolidating depending on your particular situation. Before you rush to consolidate, consider the factors below.


Consolidating your loans at a fixed rate means that if rates go up, yours will stay put. Alternatively, if there is a sharp dip in interest rates, you will still be paying the same fixed rate. So if you think rates will plummet, it might be best to wait things out.

Make sure your loans can be consolidated: consolidation loans are available for most federal loans, including FFELP loans (which include Stafford, PLUS, and SLS loans), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans.

There are also private consolidation options available for private student loans. See Step 3: Consolidate Private Loans.

To better understand the ins and outs of consolidation, see Simple Tuition's Guide to Student Loan Consolidation. (Note: The link will open as a PDF file.)

Note that you might pay more overall when you consolidate because you are extending the life of the loan (even if monthly payments are lower).

Do note, however, that the interest you pay on your student loans is tax deductible.

Evaluate the pros and cons of consolidation with your particular loans in mind.

Calculate what your consolidated rate would be to determine if it's worth consolidating.

You'll also need to decide if consolidating all your loans is a good idea, or if you should just consolidate some of them. Because your rate is determined as an average of your current rates, you may want to keep a higher rate loan out of the equation. Calculate your rate without including some high interest loans to decide if you should consolidate all or some of them.

NOTE: Check FinAid before proceeding, to see what advice it offers to current borrowers.

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Get a Private Student Loan for Winter and Spring Semester

Private student loans are a great college financing option that can help cover additional costs not covered by federal financial aid. A private student loan can be used to pay up to 100% of the cost of attendance, and cover normal tuition expenses as well as books, supplies, housing, school fees, transportation, and more.

Our private student loan is the smart and easy option:

• Non-need based - pay for the true cost of college
• E-Sign your application and be finished in minutes
• Applying with a cosigner can increase your chances of approval, and potentially lower your interest rate

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The Best Resource for Student Loans

Finding student loans for college can often be a difficult task for parents and students. Student Loan Network makes it easy by providing the best student loans, as well as the best student loan and financial aid resources on the web. Be sure to check out our student resources pages for financial aid tips, free downloads and the answers to your financial aid and student loan questions.

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Federal Student Loan Consolidation

Federal student loan consolidation is a fixed-rate refinancing program that combines all of your existing federal student loans into one new loan. Consolidation is a great tool for managing your finances - providing immediate payment relief and long term benefits. With our fast and convenient eSignature, your application will be complete in just a few minutes.

• Cut your monthly student loan payment by as much as 50%
• Simplify your finances with one monthly payment
• No credit checks, fees, or application charges
• Reduce your interest rate 0.6% by consolidating during your grace period 

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What is Student Loan Consolidation?

Consolidating your student loans generally means one lender will group together multiple loans which you have taken out. Instead of managing numerous simultaneous payments and interest rates, the consolidated loan will compile them into a single loan at a new, fixed rate. The main benefits of consolidation are that:

You will only be responsible for a single account with a single financial institution.

The interest rate for your consolidated loan will not change over time.

Consolidation potentially lower your monthly payment by extending the term of your loan.

- This may also mean paying more interest in total over the lifetime of your loan.

Despite the possible benefits of consolidating your student loans, there are many reasons why consolidating your student loans may not be your best possible option. Continue reading to determine if consolidation is beneficial to you and how to embark on the process.

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