Student Loan Forgiveness Deadline Is Today. Last Call to Maximize Debt Relief

If you have federal student loans that are not eligible for debt forgiveness programs, today is the deadline to apply for student loan consolidation, which could increase your forgiveness amount.

The Department of Education is currently reviewing past student loan payments as a one-time adjustment. This adjustment may increase the number of repayments you make to get you discharged more quickly under a qualifying income-driven repayment plan or another program, such as Public Service Loan Forgiveness. If you have federal student loans that weren’t previously eligible for debt relief programs, consolidating them before midnight on June 30 (local time) may give you access to these one-time benefits.

There’s a lot of confusion in the news right now about student loans. With part of the Biden administration’s SAVE repayment plan on hold, you may be wondering if it’s still worth consolidating your student loans.

Experts say yes.

“The deadline for consolidating the one-time IDR adjustment is not covered by the court’s decision,” said Elaine Rubin, a higher education finance and policy expert and director of corporate communications at Edvisors. “The U.S. Department of Education will continue to count qualifying payments for qualifying borrowers.”

While consolidation will benefit most borrowers, it’s not the right move for everyone. Here’s how to tell if this one-time consolidation option can maximize your debt relief and whether you should consider it.

Read more: If you have defaulted on your student loan, you may qualify for this debt relief program

What is student loan consolidation?

Student loan consolidation is similar to refinancing – it allows you to combine your existing federal student loans into a new loan with a fixed interest rate.

Why would you want to do this? If you have FFELP, Perkins, and other non-direct federal student loans, they may not qualify for forgiveness programs. By consolidating them into a new Direct Loan and enrolling in an income-driven repayment plan, you may qualify for automatic loan cancellation, interest forgiveness, or other debt relief benefits.

If you qualify for an IDR plan and have been making contributions for 20-25 years, your entire balance may be automatically forgiven.

Loan consolidation has other advantages. Having one student loan to keep track of, rather than multiple ones, can also make it easier to manage your payments. Depending on the payment plan you choose, a consolidation loan can lower your monthly payments but also extend your repayment period. But if you qualify for forgiveness after consolidation, this may not be much of a problem.

Even if you already have direct loans, you may benefit from consolidating them if you have more than one with different repayment start dates, said Mark Kantrowitz, a financial aid expert and member of CNET Money’s Expert Review Board.

Read more: Have you defaulted on your student loans? You may qualify for this debt relief program

Will my interest rate increase if I consolidate my student loans?

If you currently have low federal student loan interest rates, in most cases you don’t have to worry about your consolidated interest rate increasing dramatically.

The interest rate on your new Direct Consolidation Loan will be calculated based on a weighted average of the loans you’re consolidating and rounded up to the nearest 1/8 of 1%, according to Federal Student Aid, the official website of the Department of Education for student loans.

There is one exception, though. If you have an FFELP loan, you may lose some benefits when you consolidate. “The main concern is borrowers who get a big interest rate cut from their FFELP lender,” Kantrowitz said. “Those discounts are provided by the lender and will disappear if you consolidate your loans.”

You don’t have to consolidate all of your loans, so you can exclude FFELP loans if you want to keep your current discount. You’ll need to consider whether you qualify for forgiveness and how consolidation might affect your monthly student loan payment to decide whether consolidation is right for you.

I don’t know if I qualify for student loan forgiveness. Should I still consolidate my loans?

For many borrowers, consolidating federal student loans will help lower your monthly payment and maximize your potential debt relief. If you currently have federal student loans that are not Direct Loans, this can be especially beneficial. Consolidation can also help you lock in a fixed interest rate if any of your federal student loans have a variable interest rate.

The latest student loan forgiveness program takes into account the date of your first student loan payment. Loan consolidation helps you get credit for a new direct loan starting from an earlier loan repayment date.

So let’s say you graduated from college and made your first federal student loan payment in 2004. Then you went back to school to earn a second degree and started paying off those loans in 2010. Under an income-driven repayment plan with a 20-year path to forgiveness, you could qualify for forgiveness of your 2004 loans that year. But by consolidating your newer loans with your older ones into one new Direct Loan, your entire balance could be wiped out that year.

Even if you recently graduated from college, consolidating your federal loans and enrolling in an IDR can help you access forgiveness sooner. And if you only have one student loan, if it’s not a direct loan, you can also use consolidation.

If you don’t qualify for debt relief, however, it may not make sense to go through this step. “If you’re not currently pursuing any type of forgiveness (e.g., even IDR forgiveness) and expect to never seek forgiveness, you don’t have to do this,” Kantrowitz said.

Will the June 30 deadline be extended?

Although the Department of Education extended the loan consolidation deadline this spring from April 30 to June 30, experts don’t expect it will be pushed back again.

“The consolidation extension has not changed and is not expected to be further changed or extended,” Rubin said. If you can benefit from consolidating your loans, you’ll want to apply soon.

How to consolidate student loans

You can consolidate your federal student loans online at StudentAid.gov. To meet the deadline, you must submit your application before midnight local time on June 30. You can consolidate after this date, but you will lose some of the benefits.

To complete the application, you will need your Federal Student Aid ID, some personal information, financial information and loan information. The FSA website says it takes about 30 minutes to complete the loan consolidation application.

You can complete the application now at studentaid.gov/loan-consolidation.

Once you apply, it can take up to 60 days for your consolidation to be processed, Kantrowitz said. In the meantime, you may see your student loan payment number drop to zero. Don’t panic if that happens. It just means we’re working on the adjustments.

What happens if I miss the deadline?

If you consolidate your loans after the June 30 deadline, you can still receive credit for early payments you made on direct loans. But you may not get as much credit. Instead, your payment number will be based on a weighted average or may be reset to zero. But you can still access the debt relief program.