School Loan Consolidation

From time to time, we are asked questions about whether or not it is wise to pay off student loans using the equity in their home. For most circumstances, the answer is no.

If you have multiple student loans, it is best to have them consolidated together into one loan. If your spouse has student loans, do not consolidate them with your student loans. You lose certain benefits when you do so. For instance, to get a deferment for a spousal consolidation loan, both of you must meet eligibility requirements for deferment.

A change in federal regulations now permits partial discharge in the event of the death or total and permanent disability of one spouse. However, such loans include a joint-and-several liability clause, which makes each spouse individually responsible for repaying the entire debt after a divorce. So consolidate your loans separately.

There are several additional good reasons to consolidate your student loans. Consolidation lowers your monthly payment by lengthening the repayment period beyond the standard 10 years. Depending on the amount of your loans, you can extend your payment period up to 30 years and dramatically drop your monthly payment.

Just understand that by extending the term of you will increase your total interest costs, so you should explore your options. You probably want to keep it on a 10 year schedule anyway. Do you want to be paying on your student loans when YOUR kid hits college? A frightening thought indeed!

Okay, heres a laundry list of what types of student loans you can consolidate:

• Federal Subsidized and Unsubsidized Stafford loans
• Direct Subsidized and Unsubsidized Stafford loans
• Federal PLUS loans
• Federal Direct PLUS loans
• Federal Supplementary Loans for Students (SLSs)
• Federal Perkins loans
• Federal Nursing Student Loans (NSLs)
• Health Professions Student Loans (HPSLs)
• Health Education Assistance Loans (HEALs)
• Consolidation loans
• Federal Direct Consolidation loans

And now, what you cant consolidate (sorry, use the bank you call your home for these!) You cant include private loans you received from banks, credit unions, thrift institutions (savings and loan associations), your parents, or other individuals. Loans issued by colleges also are not eligible. You cannot use consolidation loans to finance other types of personal debt, including credit card balances or car loans. (Strict, arent they!)

Thats all for now. I hope this filled your heart with hope and wonder. Be sure to check back periodically for information on consolidating your student loans.