If you have commercially managed FFEL, Perkins or Health Education Assistance Loan (HEAL) Program loans, the deadline for student loan consolidation is April 30, 2024. In addition, federal student loans with different length payment history will also benefit from consolidation.
Why consolidate?
The Department of Education is performing a one-time payment count adjustment on student loans. One of the problems in the past was not qualifying for student loan forgiveness simply due to the loan type. This adjustment will give retroactive payment credits to loans that are normally ineligible. But to continue receiving credits for future payments, ineligible loans need to be consolidated to a Direct Consolidation Loan.
Some loans are not eligible for income driven repayment plans, loan forgiveness or public service loan forgiveness (PSLF). By consolidating ineligible loans to a Direct Consolidation Loan, they become eligible for these programs. You can even consolidate a single loan if that’s all you have.
Loans of differing payment lengths could see an even greater benefit by consolidating. The Direct Consolidation Loan will use the loan with the longest payment history as the payment count for the consolidation loan.
What’s the catch?
Many of the problems consolidating had in the past have also been eliminated. One of the biggest problems was consolidating reset the payment count back to zero. This has been fixed. By applying for a consolidation loan by April 30, 2024, your historical payments will be credited to the new Direct Consolidation Loan. Next, if you have unpaid accrued interest, this could be capitalized (added to the principal) on the new consolidation loan. However, for those working toward loan forgiveness, especially public service loan forgiveness, capitalized interest simply increases the balance forgiven and the total cost of monthly payments does not change. Finally, for those who qualify, Perkins Loan cancellation may be a better option than loan forgiveness programs. Most physicians do not qualify for Perkins Loan cancellation. In the rare cases for those who do qualify, it may be better to exclude Perkins Loans from the Direct Consolidation Loan.
Other details
This short article does not go into all the details of student loans. For more information, be sure to consult your loan servicer, a knowledgeable student loan advisor and online resources about the April 30 deadline and loan consolidation including:
For personalized help with your financial plan, please contact Mark Ziety, CFP®, AIF® 608.442.3750.
WisMed Financial, Inc. is part of the Wisconsin Medical Society
Disclosures
Note: This article is for informational purposes only and should not be considered as financial or tax advice. Please consult with a qualified financial advisor or tax professional before making any financial decisions.
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