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You can often consolidate your federal student loans. Whether it’s a good idea, however, is a different matter entirely.
I’m a big fan of keeping my finances simple.
The more bills I get each month, the more likely it is that something’s going to fall through the cracks.
That’s why I like to pay my utility bills automatically through my checking account, and why I opt for paperless billing whenever possible.
When it comes to consolidating your federal student loans, however, the decision isn’t always so simple.
Can You Consolidate Your Federal Student Loans?
Though most federal student loans can be consolidated under the Direct Loan program (which is administered through the U.S. Department of Education), there are exceptions to the rule.
Some Loans Can’t Be Consolidated. You can’t consolidate private education loans with your federal loans. You also can’t consolidate a PLUS loan originally made to the parent of a dependent student.
Default May Be An Issue. In order to consolidate, you’ve got to have at least one Direct Loan or FFEL Program loan that is in a grace period or in repayment. If one of your loans is in default then you’ve got to either cure the default before consolidating or agree to repay the new Direct Consolidation Loan under either the Income-Based Repayment Plan, Pay As You Earn Repayment Plan, or the Income-Contingent Repayment Plan.
You Can Consolidate Only Once. Consolidation is usually a one-time process; you can’t ordinarily consolidate a loan that’s already gone through the system as you would with refinancing a mortgage or a car loan.
You can, however, consolidate an existing consolidation loan again by adding in an additional Direct Loan or FFEL Program loan in the consolidation.
For this reason I’ve heard of people going back to school for a semester and taking out a new Direct Loan for a single class so they could reconsolidate. That just doesn’t sound like a wise financial move – adding in debt simply so you can consolidate again. If you’re thinking about doing this, you may want to give me a buzz first so I can show you just how bad of an idea this is.
See also:
Is Consolidation A Good Idea?
Let’s say you can consolidate – now you need to figure out whether it’s a good idea for you.
Just because you can do something, after all, doesn’t necessarily mean you should.
In order to make your decision, consider these issues:
Your Interest Rate May Change. The interest rate on a Direct Consolidation Loan is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%. If you’ve got one loan with an outrageously high rate, that’s going to bring up the average.
You May Enter Repayment Faster. Repayment on your new consolidated loan will begin within 60 days of the date of consolidation. If you’re currently in deferment or forbearance, that could hit you in pocket pretty quickly.
Your Payments May Rise. Remember that your interest rate will change once you consolidate; that means your payments may actually go up rather than down. Estimate your weighted average interest rate to determine your loan payments after consolidation.
The Federal Loans May Not Be Your Problem. If your private student loans or other debts are the ones dragging you down, then consolidating won’t really solve the problems. Take a look at the rest of your financial situation to make the smart move.
See also:
- How To Know If Your Student Loan Is Federal Or Private
- Federal Student Loan Standard Repayment Options
- Income-Based Repayment For Federal Student Loans
- Direct Loan Consolidation Payment Calculator
Tread Lightly To Avoid Problems Later
The student loan companies sell consolidation as a cure-all for your student loan problems. But as you can see, it’s not always so.
Spend some time getting the facts about how the process will impact your bottom line. If it makes sense, go for it.
And if not, take a pass.
Most income taxes cannot be discharged in bankruptcy, but some can. To find out whether yours can, your lawyer will need your tax account transcript. The IRS makes these available now on line. You can download yours here. Why do you need that? Your lawyer can use your account transcript to see if your taxes […]The post Before bankruptcy: Getting your tax account transcripts appeared first on Robert Weed.
The Statement of Current Monthly Income is used by judges to determine if your income level raises the question of abuse of the bankruptcy laws. Part of the responsibility of the judge in a bankruptcy case is to ensure that debtors do not abuse the bankruptcy laws and avoid paying debts by filing bankruptcy when they have the means to pay. Prior to 2005, this determination was made at the discretion of judges. After new bankruptcy laws were passed in 2005, judges are no longer able to use their discretion, but instead follow the formulas outlined in the law to determine if there is abuse. The Statement of Current Monthly Income provides this information to the judge.The post The Statement of Current Monthly Income and Your Bankruptcy Plan appeared first on Tucson Bankruptcy Attorney.
The Statement of Current Monthly Income is used by judges to determine if your income level raises the question of abuse of the bankruptcy laws. Part of the responsibility of the judge in a bankruptcy case is to ensure that debtors do not abuse the bankruptcy laws and avoid paying debts by filing bankruptcy when they have the means to pay. Prior to 2005, this determination was made at the discretion of judges. After new bankruptcy laws were passed in 2005, judges are no longer able to use their discretion, but instead follow the formulas outlined in the law to determine if there is abuse. The Statement of Current Monthly Income provides this information to the judge.
A layperson is often at a disadvantage when defending against a debt collection suit filed by an attorney. The debtor as a defendant does not know the "rules of the game" and sometimes takes the advice or direction of court staff (who by the way should not be giving legal advice but often do.)
Talking to clients who have appeared to defend in small claim collection suits in this area (Northern Virginia, suburban Maryland and DC), I am surprised that many will meekly follow court staff instructions to come back to court on another date -- when the collector's attorney fails to show up or is late! This failing is a perfect opportunity to have the case thrown out!
You have a right to ask the court to proceed on the case. Tell the clerk that you are present and ready for the case to be called. When the case is called, proceed to the podium and ask the court to have the case "dismissed with prejudice." That very important qualifier -- "with prejudice" -- means that you are asking the court to dismiss forever.
The plaintiff can ask the court to re-instate the case later, but, for most judges, he will have to have a very good excuse, for example unavoidable illness that came on suddenly, and he will need to ask for that reinstatement very soon after the dismissal, in most cases, within 30 days.
Remember: It's the plaintiff's case. He brought it. Not you. You're present and ready to go forward. If he's not there, the law is very willing to treat him harshly.
It's a simple technique, and a very valuable one, to get rid of a lawsuit.
If you need more advice, call our law firm. We're ready to help.
A layperson is often at a disadvantage when defending against a debt collection suit filed by an attorney. The debtor as a defendant does not know the "rules of the game" and sometimes takes the advice or direction of court staff (who by the way should not be giving legal advice but often do.)
Talking to clients who have appeared to defend in small claim collection suits in this area (Northern Virginia, suburban Maryland and DC), I am surprised that many will meekly follow court staff instructions to come back to court on another date -- when the collector's attorney fails to show up or is late! This failing is a perfect opportunity to have the case thrown out!
You have a right to ask the court to proceed on the case. Tell the clerk that you are present and ready for the case to be called. When the case is called, proceed to the podium and ask the court to have the case "dismissed with prejudice." That very important qualifier -- "with prejudice" -- means that you are asking the court to dismiss forever.
The plaintiff can ask the court to re-instate the case later, but, for most judges, he will have to have a very good excuse, for example unavoidable illness that came on suddenly, and he will need to ask for that reinstatement very soon after the dismissal, in most cases, within 30 days.
Remember: It's the plaintiff's case. He brought it. Not you. You're present and ready to go forward. If he's not there, the law is very willing to treat him harshly.
It's a simple technique, and a very valuable one, to get rid of a lawsuit.
If you need more advice, call our law firm. We're ready to help.
Deciding whether to file for bankruptcy with your spouse or to go it alone isn’t a simple choice.
You know you can file for bankruptcy alone. And if you live in a community property state, you know your spouse gets some of the benefits of bankruptcy without filing.
But that doesn’t help you decide if you should file together or not. It’s a lot more complicated that that.
Will Your Household Benefit Financially?
A marital household is a single economic unit – at least, it should be. Money comes into the household and it combined, then expenses are paid from that pool of income.
When you file for bankruptcy without your spouse, you’re eliminating your debt problems – but only yours. Unless you live in a community property state such as California and are dealing solely with joint debts, you’re still going to need to pay your spouse’s debts after your case is over.
Is your spouse debt-free? If so, there’s no financial benefit to including him or her in the filing.
If, however, your household is still going to be saddled with significant debt afterwards then maybe it’s a good idea to “kill two birds with one stone” by wiping out all of your debts at once. Otherwise, you’re going to have to spend more of your household income on debt repayment.
Do You Need Your Spouse’s Credit?
After you file for bankruptcy, your credit will take awhile to improve.
If your spouse has excellent credit, filing for bankruptcy alone will keep you in the credit game in spite of your discharge.
That means you’ll qualify for new credit – including a car loan and mortgage – more quickly than would otherwise be possible.
Of course, this is secondary to the issue of your spouse’s debt situation. If your household is going to be left with significant debt that will drain your pockets each month then good credit may not be enough. Better to bite the bullet and get rid of the debt altogether before contemplating that new house.
How’s Your Marriage?
If your marriage is good and you live in a community property state such as California, filing for bankruptcy without your spouse may protect you from your creditors.
Remember, though, that the community discharge protections end when the marriage is over. Divorce or death of the filing spouse terminates the community discharge, and collections will continue.
Filing Separately To Hedge Your Bet
If you’re looking to stop a foreclosure, filing for bankruptcy offers a quick and simple way to accomplish that – the automatic stay. The foreclosure has to stop once your case is filed, and you can use the court-ordered repayment plan to bring the arrears current.
If, however, the repayment plan falls through then you may end up getting your case dismissed (thrown out of court). Filing again may not offer you the same automatic stay protections.
Your spouse, however, can file a new bankruptcy case and get the full benefit of the automatic stay – even if your solo bankruptcy case didn’t work out.
No Easy Answers Without Deep Analysis
Part of my job as a bankruptcy lawyer – in fact, part of any good lawyer’s job – is to ask questions that will help make the decision easier.
It’s not a quick analysis, but you’re dealing with your financial future. Getting the wrong answer could cost you a lot of money, stability, and difficulties.
Reasons To File Bankruptcy People hesitate to file bankruptcy for a variety of reasons. The first is the name bankruptcy has a negative connotation which has been around for centuries. The truth is bankruptcy was put in place to help people who are struggling financially. Bankruptcy is not a scarlet letter that someone has to+ Read MoreThe post Why Do People Hesitate To File Bankruptcy? appeared first on David M. Siegel.
Once you file for bankruptcy, there are two things that automatically occur: the automatic stay springs into effect to prevent your creditors from collecting, and the bankruptcy estate is created. The bankruptcy estate defines the nature of your assets by the date and time that you filed for bankruptcy. Money earned immediately before filing for bankruptcy is considered property of the estate, while money earned after filing your petition is not a part of the estate.The post Understanding the Bankruptcy Estate appeared first on Tucson Bankruptcy Attorney.
Once you file for bankruptcy, there are two things that automatically occur: the automatic stay springs into effect to prevent your creditors from collecting, and the bankruptcy estate is created. The bankruptcy estate defines the nature of your assets by the date and time that you filed for bankruptcy. Money earned immediately before filing for bankruptcy is considered property of the estate, while money earned after filing your petition is not a part of the estate.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.