Student Loan Forgiveness Deadline: There Are Only a Few Weeks Left to Maximize Your Debt Relief – CNET
You must consolidate your student loans by June 30 to qualify for this opportunity to increase your forgiveness amount.
Courtney Johnston
Senior Editor
Courtney Johnston is a senior editor leading the CNET Money team. Passionate about financial literacy and inclusion, she has a decade of experience as a freelance journalist covering policy, financial news, real estate and investing. A New Jersey native, she graduated with an M.A. in English Literature and Professional Writing from the University of Indianapolis, where she also worked as a graduate writing instructor.
Tiffany Connors
Editor
Tiffany Wendeln Connors is a senior editor for CNET Money with a focus on credit cards. Previously, she covered personal finance topics as a writer and editor at The Penny Hoarder. She is passionate about helping people make the best money decisions for themselves and their families. She graduated from Bowling Green State University with a bachelor’s degree in journalism and has been a writer and editor for publications including the New York Post, Women’s Running magazine and Soap Opera Digest. When she isn’t working, you can find her enjoying life in St. Petersburg, Florida, with her husband, daughter and a very needy dog.
CNET staff — not advertisers, partners or business interests — determine how we review the products and services we cover. If you buy through our links, we may get paid.
Courtney Johnston
Senior Editor
Courtney Johnston is a senior editor leading the CNET Money team. Passionate about financial literacy and inclusion, she has a decade of experience as a freelance journalist covering policy, financial news, real estate and investing. A New Jersey native, she graduated with an M.A. in English Literature and Professional Writing from the University of Indianapolis, where she also worked as a graduate writing instructor.
Tiffany Connors
Editor
Tiffany Wendeln Connors is a senior editor for CNET Money with a focus on credit cards. Previously, she covered personal finance topics as a writer and editor at The Penny Hoarder. She is passionate about helping people make the best money decisions for themselves and their families. She graduated from Bowling Green State University with a bachelor’s degree in journalism and has been a writer and editor for publications including the New York Post, Women’s Running magazine and Soap Opera Digest. When she isn’t working, you can find her enjoying life in St. Petersburg, Florida, with her husband, daughter and a very needy dog.
CNET staff — not advertisers, partners or business interests — determine how we review the products and services we cover. If you buy through our links, we may get paid.
If you have federal student loans, the clock is ticking on your chance to boost your forgiveness amount.
The Department of Education is currently reviewing past student loan payment counts to maximize borrowers’ debt relief benefits. If you have federal loans that aren’t eligible for forgiveness programs, consolidating them into a new Direct Loan could help you qualify for more relief.
But borrowers only have until June 30 to apply for this benefit.
I talked to financial aid expert Mark Kantrowitz to learn more about this one-time consolidation option, how it could maximize your debt relief and who should consider it.
Read more: Borrowers Stuck in Student Loan Limbo During Processing Pause
Student loan debt consolidation is similar to refinancing — it lets you combine your existing federal student loans into a new loan with a fixed interest rate.
Why would you want to do this? If you hold FFELP, Perkins and other nondirect federal student loans, they may not be eligible for forgiveness programs. By consolidating them into a new Direct Loan and enrolling in an income-driven repayment plan, you may be eligible for automatic loan cancellation, interest forgiveness or other debt relief benefits.
If you qualify for an IDR plan and have been making payments for 20-25 years, your entire balance could be forgiven automatically.
And there are other benefits to loan consolidation. Having one student loan to keep track of, rather than many, can also make it easier to manage payments. Depending on the payment plan you choose, a consolidation loan could lower your monthly payments but also extend your repayment period. But if you’re eligible for forgiveness after consolidating, this might not be much of a concern.
Even if you already have Direct Loans, you might benefit from consolidating if you have more than one with different repayment start dates, said Kantrowitz, who’s also a member of CNET Money’s Expert Review Board.
Private student loan companies also offer debt consolidation for student loans. Even if these programs offer lower interest rates or other perks, converting your federal student loan into a private loan rarely makes sense. Private student loans are not eligible for federal income-driven repayment programs or federal debt relief.
Read more: Did You Default on Your Student Loans? You May Qualify for This Debt Relief Program
If you currently have low interest rates on your federal student loans, you won’t have to worry about your new consolidated rate spiking — in most cases.
Your new Direct Consolidation Loan’s interest rate will be based on a weighted average of the loans you consolidate and it will be rounded up to the next 1/8th of 1%, according to Federal Student Aid, the Department of Education’s official student loan website.
There’s one exception, though. If you have a FFELP loan, you might lose some benefits when consolidating. “The main issue is borrowers who have a big interest rate reduction from the FFELP lender,” said Kantrowitz. “These discounts are provided by the lender and will disappear if you consolidate the loans.”
You don’t have to consolidate all of your loans, so you might exclude your FFELP loans if you want to keep your current discount. You’ll need to weigh whether you qualify for forgiveness and how consolidating might affect your monthly student loan payment to decide if consolidating is right for you.
If you have unpaid interest on a student loan, it will be capitalized when you consolidate the loan and could increase your principal balance. Factor that in when deciding how much your new monthly payment would be and how much you may qualify for in forgiveness.
For many borrowers, consolidating your federal student loans will help lower your monthly payment and could maximize your potential debt relief. If you currently hold federal student loans that are not Direct Loans, it can be particularly beneficial. Consolidating can also help you lock in a fixed interest rate if any of your federal student loans have a variable rate.
The latest student loan forgiveness program takes into account the date of your first student loan payment. Consolidating your loans helps ensure you get credit for your new Direct Loan starting with your earlier loan payment date.
So, let’s say you graduated from college and made your first federal student loan payment in 2004. Later, you went back to school for a second degree and started paying those loans in 2010. Under an income-driven repayment plan with a 20-year path to forgiveness, you might be eligible to have your loans from 2004 forgiven this year. But by consolidating your more recent loans with your older ones into one new Direct Loan, your entire balance could be wiped out this year.
Even if you graduated more recently, consolidating your federal loans and enrolling in an IDR can help you get access to forgiveness sooner. And if you only have one student loan, if it’s not a Direct Loan, you may also benefit from consolidating.
But if you don’t qualify for debt relief, it may not make sense to go through this step. “If you are not currently pursuing any kind of forgiveness (e.g., not even IDR forgiveness) and expect to never pursue forgiveness, then you don’t need to do it, ” said Kantrowitz.
You can consolidate your federal student loans online at StudentAid.gov. You’ll need to submit your application before midnight local time on June 30 to meet the deadline. You can consolidate after this date, but would miss out on some benefits.
To fill out the application, you’ll need your Federal Student Aid ID, some personal information, financial information and loan information to fill out the application. The FSA website says it takes approximately 30 minutes to complete the application for consolidating your loans.
You can fill out the application now at studentaid.gov/loan-consolidation.
Once you apply, it can take up to 60 days to process your consolidation, said Kantrowitz. In the meantime, you might see your student loan payment count drop to zero. Don’t panic if this happens. It just means your adjustment count is being worked on.
If you consolidate your loans after the June 30 deadline, you can still get credit for past payments made on direct loans. But you might not get as much credit. Instead, your payment count would be based on a weighted average or may reset to zero. But, you could still gain access to a debt relief program.
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Here’s all of the excitement headed to your inbox.
CNET editors independently choose every product and service we cover. Though we can’t review every available financial company or offer, we strive to make comprehensive, rigorous comparisons in order to highlight the best of them. For many of these products and services, we earn a commission. The compensation we receive may impact how products and links appear on our site.
Writers and editors and produce editorial content with the objective to provide accurate and unbiased information. A separate team is responsible for placing paid links and advertisements, creating a firewall between our affiliate partners and our editorial team. Our editorial team does not receive direct compensation from advertisers.
CNET Money is an advertising-supported publisher and comparison service. We’re compensated in exchange for placement of sponsored products and services, or when you click on certain links posted on our site. Therefore, this compensation may impact where and in what order affiliate links appear within advertising units. While we strive to provide a wide range of products and services, CNET Money does not include information about every financial or credit product or service.
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Courtney Johnston
Senior Editor
Courtney Johnston is a senior editor leading the CNET Money team. Passionate about financial literacy and inclusion, she has a decade of experience as a freelance journalist covering policy, financial news, real estate and investing. A New Jersey native, she graduated with an M.A. in English Literature and Professional Writing from the University of Indianapolis, where she also worked as a graduate writing instructor.
Tiffany Connors
Editor
Tiffany Wendeln Connors is a senior editor for CNET Money with a focus on credit cards. Previously, she covered personal finance topics as a writer and editor at The Penny Hoarder. She is passionate about helping people make the best money decisions for themselves and their families. She graduated from Bowling Green State University with a bachelor’s degree in journalism and has been a writer and editor for publications including the New York Post, Women’s Running magazine and Soap Opera Digest. When she isn’t working, you can find her enjoying life in St. Petersburg, Florida, with her husband, daughter and a very needy dog.
CNET staff — not advertisers, partners or business interests — determine how we review the products and services we cover. If you buy through our links, we may get paid.
Courtney Johnston
Senior Editor
Courtney Johnston is a senior editor leading the CNET Money team. Passionate about financial literacy and inclusion, she has a decade of experience as a freelance journalist covering policy, financial news, real estate and investing. A New Jersey native, she graduated with an M.A. in English Literature and Professional Writing from the University of Indianapolis, where she also worked as a graduate writing instructor.
Tiffany Connors
Editor
Tiffany Wendeln Connors is a senior editor for CNET Money with a focus on credit cards. Previously, she covered personal finance topics as a writer and editor at The Penny Hoarder. She is passionate about helping people make the best money decisions for themselves and their families. She graduated from Bowling Green State University with a bachelor’s degree in journalism and has been a writer and editor for publications including the New York Post, Women’s Running magazine and Soap Opera Digest. When she isn’t working, you can find her enjoying life in St. Petersburg, Florida, with her husband, daughter and a very needy dog.
CNET staff — not advertisers, partners or business interests — determine how we review the products and services we cover. If you buy through our links, we may get paid.
If you have federal student loans, the clock is ticking on your chance to boost your forgiveness amount.
The Department of Education is currently reviewing past student loan payment counts to maximize borrowers’ debt relief benefits. If you have federal loans that aren’t eligible for forgiveness programs, consolidating them into a new Direct Loan could help you qualify for more relief.
But borrowers only have until June 30 to apply for this benefit.
I talked to financial aid expert Mark Kantrowitz to learn more about this one-time consolidation option, how it could maximize your debt relief and who should consider it.
Read more: Borrowers Stuck in Student Loan Limbo During Processing Pause
Student loan debt consolidation is similar to refinancing — it lets you combine your existing federal student loans into a new loan with a fixed interest rate.
Why would you want to do this? If you hold FFELP, Perkins and other nondirect federal student loans, they may not be eligible for forgiveness programs. By consolidating them into a new Direct Loan and enrolling in an income-driven repayment plan, you may be eligible for automatic loan cancellation, interest forgiveness or other debt relief benefits.
If you qualify for an IDR plan and have been making payments for 20-25 years, your entire balance could be forgiven automatically.
And there are other benefits to loan consolidation. Having one student loan to keep track of, rather than many, can also make it easier to manage payments. Depending on the payment plan you choose, a consolidation loan could lower your monthly payments but also extend your repayment period. But if you’re eligible for forgiveness after consolidating, this might not be much of a concern.
Even if you already have Direct Loans, you might benefit from consolidating if you have more than one with different repayment start dates, said Kantrowitz, who’s also a member of CNET Money’s Expert Review Board.
Private student loan companies also offer debt consolidation for student loans. Even if these programs offer lower interest rates or other perks, converting your federal student loan into a private loan rarely makes sense. Private student loans are not eligible for federal income-driven repayment programs or federal debt relief.
Read more: Did You Default on Your Student Loans? You May Qualify for This Debt Relief Program
If you currently have low interest rates on your federal student loans, you won’t have to worry about your new consolidated rate spiking — in most cases.
Your new Direct Consolidation Loan’s interest rate will be based on a weighted average of the loans you consolidate and it will be rounded up to the next 1/8th of 1%, according to Federal Student Aid, the Department of Education’s official student loan website.
There’s one exception, though. If you have a FFELP loan, you might lose some benefits when consolidating. “The main issue is borrowers who have a big interest rate reduction from the FFELP lender,” said Kantrowitz. “These discounts are provided by the lender and will disappear if you consolidate the loans.”
You don’t have to consolidate all of your loans, so you might exclude your FFELP loans if you want to keep your current discount. You’ll need to weigh whether you qualify for forgiveness and how consolidating might affect your monthly student loan payment to decide if consolidating is right for you.
If you have unpaid interest on a student loan, it will be capitalized when you consolidate the loan and could increase your principal balance. Factor that in when deciding how much your new monthly payment would be and how much you may qualify for in forgiveness.
For many borrowers, consolidating your federal student loans will help lower your monthly payment and could maximize your potential debt relief. If you currently hold federal student loans that are not Direct Loans, it can be particularly beneficial. Consolidating can also help you lock in a fixed interest rate if any of your federal student loans have a variable rate.
The latest student loan forgiveness program takes into account the date of your first student loan payment. Consolidating your loans helps ensure you get credit for your new Direct Loan starting with your earlier loan payment date.
So, let’s say you graduated from college and made your first federal student loan payment in 2004. Later, you went back to school for a second degree and started paying those loans in 2010. Under an income-driven repayment plan with a 20-year path to forgiveness, you might be eligible to have your loans from 2004 forgiven this year. But by consolidating your more recent loans with your older ones into one new Direct Loan, your entire balance could be wiped out this year.
Even if you graduated more recently, consolidating your federal loans and enrolling in an IDR can help you get access to forgiveness sooner. And if you only have one student loan, if it’s not a Direct Loan, you may also benefit from consolidating.
But if you don’t qualify for debt relief, it may not make sense to go through this step. “If you are not currently pursuing any kind of forgiveness (e.g., not even IDR forgiveness) and expect to never pursue forgiveness, then you don’t need to do it, ” said Kantrowitz.
You can consolidate your federal student loans online at StudentAid.gov. You’ll need to submit your application before midnight local time on June 30 to meet the deadline. You can consolidate after this date, but would miss out on some benefits.
To fill out the application, you’ll need your Federal Student Aid ID, some personal information, financial information and loan information to fill out the application. The FSA website says it takes approximately 30 minutes to complete the application for consolidating your loans.
You can fill out the application now at studentaid.gov/loan-consolidation.
Once you apply, it can take up to 60 days to process your consolidation, said Kantrowitz. In the meantime, you might see your student loan payment count drop to zero. Don’t panic if this happens. It just means your adjustment count is being worked on.
If you consolidate your loans after the June 30 deadline, you can still get credit for past payments made on direct loans. But you might not get as much credit. Instead, your payment count would be based on a weighted average or may reset to zero. But, you could still gain access to a debt relief program.
CNET Money brings financial insights, trends and news to your inbox every Wednesday.
By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.
Here’s all of the excitement headed to your inbox.
CNET editors independently choose every product and service we cover. Though we can’t review every available financial company or offer, we strive to make comprehensive, rigorous comparisons in order to highlight the best of them. For many of these products and services, we earn a commission. The compensation we receive may impact how products and links appear on our site.
Writers and editors and produce editorial content with the objective to provide accurate and unbiased information. A separate team is responsible for placing paid links and advertisements, creating a firewall between our affiliate partners and our editorial team. Our editorial team does not receive direct compensation from advertisers.
CNET Money is an advertising-supported publisher and comparison service. We’re compensated in exchange for placement of sponsored products and services, or when you click on certain links posted on our site. Therefore, this compensation may impact where and in what order affiliate links appear within advertising units. While we strive to provide a wide range of products and services, CNET Money does not include information about every financial or credit product or service.
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