I owe $30,000
October 17, 2008 7:57 PM   Subscribe

[StudentLoanRepaymentFilter] Should I transfer my Direct Loans to some private loan consolidation company?


I was an AmeriCorps VISTA, so my loans have been in deferment. I have to start repaying on them again in January. I cannot, however, afford the minimum payments I am supposed to be paying (my husband and I are living off of one salary right now). The payments they want on the standard payments are $320 a month, and if memory serves they wanted something like $240 a month for the income contingent payments. Right now I figure I can maybe afford at the very most $150 a month.

Will they (the Dept of Education?) work with me on this? I'm not sure if they ever deviate from the 3 or 4 payment plans they have. Or should I go with a private consolidation? If so, which company?
posted by All.star to Work & Money (4 answers total) 8 users marked this as a favorite
How to Consolidate Student Debt with the DOE

"So what you have to do is call the DOE (1-800-557-7392) and say "I can't get a Consolidation Loan with income-sensitive repayment terms from my current lender! Help! I'm broke! I want to pay, but they won't give me a chance!" etc."

It's well written, and informative. I really think you should follow through with the DOE.
posted by saxamo at 8:07 PM on October 17, 2008 [3 favorites]

I would recommend consolidating your loans through the Department of Educations's Consolidation Program. It's fairly straight-forward and their rates are likely to be far better (fairer) than a private consolidation service. I consolidated my loans through the DoE about 4 years ago and it was, by government standards, pretty breezy.

The nice thing about consolidating through the government is that they are fairly flexible with borrowers. They will work with you to find an acceptable payment so long as you call them to discuss it. It is also easy to complete forbearance requests online for situations when you need to reduce your payment or temporarily stop making payments due to financial hardship. You will continue to be charged interest on your loans, but if you just can't afford to make a payment, it's a viable option. I have done this with my loans on several occasions.

You can find out more information about consolidation if you log into the Direct Loan Servicing website. There should be a "consolidation" link on the left-hand menu bar once you're logged in. Good luck!
posted by karizma at 9:37 PM on October 17, 2008

If you reconsolidate your direct loans through a private company you could have a problem getting any sort of cancellation on your loans.

For example, I'm a teacher in a low income area. I have a Perkins loan that
slowly slowly gets cancelled, ( a portion for every year I teach) If I had consolidated
that loan even through the Direct Loan program I would not be able to my 10 % a year

I think that cancellations for service jobs like teaching, social work, etc will hopefully
be more available in the future. Consider whether you will EVER want to do these
before you consolidate with someone. Once you take it out of the government's hands (Direct
Loans) you kiss that goodbye.
posted by aetg at 7:04 AM on October 18, 2008

Definitely consolidate through the DOE. A few other reasons this is your best bet:

- There's still a lot of instability in the financial markets, and if you consolidate with a private lender, your consolidation loan could get sold off and the terms changed.

- Last year, Congress passed a federal student loan forgiveness program for people who work in the public sector (government and nonprofits) for ten years. The details of this plan are still being ironed out, but you do need to consolidate with Direct Loans to have a chance of taking advantage of this. Incidentally, Senator Obama has also said he would provide loan help to graduates working as public servants if he's president, and again, I'm sure you would have to be using Direct Loans for this.
posted by lunasol at 7:26 AM on October 18, 2008

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