Last call: This crucial deadline for student loan forgiveness ends today

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If you have federal student loans that aren’t eligible for debt relief programs, today is your last chance to increase your forgiveness amount.

The Department of Education is reviewing the calculation of past student loan payments as part of a one-time adjustment. This adjustment could increase your payment number so that you could become eligible for forgiveness sooner under a qualified income-based repayment plan or another program such as Public Service Loan Forgiveness. Consolidating before June 30 could help apply these benefits to federal loans that were previously ineligible for student forgiveness programs.

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

Experts say yes.

“The consolidation timeline for one-time IDR adjustments will not be affected by the court’s decision,” said Ellen Rubin, a higher education finance and policy expert and director of corporate communications for Advisers. “The U.S. Department of Education will still calculate eligible payments for eligible borrowers.”

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

Read more: If you haven’t paid off your student loans, you may qualify for this debt relief program

What is student loan consolidation?

Student loan debt consolidation is similar to refinancing — it lets you combine your existing federal student loans into one 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 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.

“Consolidation increases the number of payments that count toward forgiveness and synchronizes your forgiveness date.”

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

And there are other benefits to loan consolidation, too. Keeping track of one student loan instead of several also makes payments easier to manage. Depending on the payment plan you choose, a consolidation loan may lower your monthly payment but also extend your repayment term. But if you’re eligible for forgiveness after consolidation, this may not be much of a concern.

If you already have Direct Loans, you may benefit from consolidation if you have more than one loan with different repayment start dates, said Mark Kantrowitz, a financial aid expert and member of CNET Money’s expert review board.

Private student loan companies also offer loan consolidation for student loans. Even though these programs offer lower interest rates or other features, converting your federal student loans to private loans rarely makes sense. Private student loans are not eligible for federal income-driven repayment programs or federal debt relief.

Read more: Haven’t paid off your student loans? You may be eligible for this debt relief program

Will my interest rate go up if I consolidate my student loans?

If interest rates on your federal student loans are currently low, you won’t have to worry about the new consolidated rate increase — in most cases.

According to Federal Student Aid, the official student loan website of the Department of Education, the interest rate on your new Direct Consolidation Loan will be based on the weighted average of the loans you consolidate and rounded to the next 1/8th of 1%.

There is an exception, however. If you have an FFELP loan, you may lose some benefits when you consolidate. “The main issue is borrowers who get large interest rate discounts from the FFELP lender,” Kantrowitz said. “These discounts are provided by the lender and will disappear if you consolidate loans.”

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

If you have unpaid interest on student loans, it will be capitalized when you consolidate loans and can increase your principal balance. Keep this in mind when deciding what your new monthly payment will be and how much forgiveness you may be eligible for.

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

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

The latest student loan forgiveness program takes into account the date of your first student loan payment. Consolidating your loans helps ensure that you get credit from your previous loan payment date for your new Direct Loan.

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 began paying those loans in 2010. Under an income-driven repayment plan with 20-year forgiveness, you may be eligible to have your loans from 2004 forgiven this year. But by consolidating your more recent loans with your older loans into a new Direct Loan, your entire balance could be eliminated this year.

Even if you recently graduated, consolidating your federal loans and enrolling in IDR can help you get forgiveness sooner. And if you only have one student loan, if it’s not a Direct Loan, you may also benefit from consolidation.

But if you don’t qualify for debt relief, it may not be wise to go through with this step. “If you’re not currently seeking any kind of forgiveness (e.g., not even IDR forgiveness) and expect to never seek forgiveness, you don’t need to do this,” Kantrowitz said.

Will the June 30 deadline be extended?

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

“There has been no change to the extension for consolidation, and it is not anticipated that there will be any changes or extensions,” Rubin said. If you could benefit from consolidation of your loans, you should apply soon.

How to Consolidate Your Student Loans

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

To fill out the application, you’ll 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 application to consolidate your loans.

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

Once you apply, your consolidation can take up to 60 days to process, Kantrowitz said. In the meantime, you may notice that your student loan payment number drops to zero. Don’t panic if that happens. It means your adjustment number is being worked on.

What happens if you miss the deadline?

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 will be calculated based on a weighted average or may reset to zero. But, you can still get access to debt relief programs.

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