mae loans

Can You Consolidate Your Student Loans And Later Defer Them If You Go Back To School?

The question really has a number of nuances to it. Let us break it up as much as we can. Firstly, let us look into consolidation. Can you consolidate your loans? Ofcourse you can, just be smart about the timing on your consolidation. Look carefully into the reasons for consolidating, weigh the effects of your loan consolidation on your credit score and decide if loan consolidation makes sense.

As far as deferment is concerned, yes both subsidized loans and unsubsidized loans can be deferred. Subsidized loans such as Stafford loan or Perkins loan can be deferred with the government bearing the interest payments during the deferment period. In the case of unsubsidized loans such as the PLUS loans and private student loans from banks and other financial institutions, the interest on the loan is accrued and will add to your student loan amount.

Deferment of loans again is on a case by case basis. Can I defer my loans if I go back to school? Yes, you can but they are certain restrictions. You can defer your loans only if you decide to go back to school on a more than half time basis. Once your loans are deferred then your payments stop for the period of deferment. Do ensure you maintain your school status. You cannot be taking a break from school or skipping a semester or your loan deferment will end.

So if you are considering consolidating your loans and then deferring them while you go back to school, do ensure that you firstly shop around for the best loan consolidating option and ensure you understand and meet any restrictions or clauses there might be to defer your loan.

I’m listing some of the questions we get on this subject below. All personal information has been removed.

  • “Can I consolidate my loans and defer them if I enroll in a part time course?”
  • “I am thinking of going back to school but I need to stop my loan payments while I’m at school. Is deferment an option for me?”
  • “Can I consolidate my stafford loan if I go back to school?”
  • “Can my stop payments on my federal loan when I’m back in school?”
  • “I want to consolidate my loans with Sallie Mae or another private direct loans to lower my payments. Do I still have the option for deferment for lack of income or going back to school?”

Should I and How Do I Consolidate My Student Loans?

A common question that we are often asked is I have several Student Loans out, and I’m supposed to begin repayment soon. I’ve heard that if I consolidate my student loans, it can lower monthly payments, and it puts them at a fixed interest rate. Is this right? How do I go about getting my loans consolidated? Is it hard to qualify for it? Do I have to have full-time employment before I consolidate? Lastly, has anyone ever heard about student loan interest being tax deductible?

Let’s start with the easy ones, first

Student loan interest IS tax-deductible. The maximum amount you can claim each year is $2500. If you paid more than that, you can not deduct anything over $2500.

(Can I assume that your starting salary won’t be in excess of $55,000? If you do make more than $55,000, you won’t be able to take the full deduction for student loan interest.)

Do you have to be employed full-time in order to consolidate? No you dont.

Should you consolidate your students loans? Ah, now that’s the tough one. Here’s what the Department of Education has to say about consolidation loans:

“Always Consider the Cost”. You should keep in mind that although consolidation can simplify loan repayment and lower your monthly payment, it also can significantly increase the total cost of repaying your loans. Consolidation offers lower monthly payments by giving borrowers up to 30 years to repay their loans. So, you’ll make more payments and pay more in interest. In fact, in some situations consolidation can double your total interest expense. If you don’t need monthly payment relief, you should compare the cost of repaying your unconsolidated loans against the cost of repaying a consolidation loan. You also should take into account the impact of losing any borrower benefits offered under non-consolidated repayment plans. Borrower benefits, which may include interest rate discounts, principal rebates, or some loan cancellation benefits can significantly reduce the cost of repaying your loans.

Once made, Federal Consolidation Loans cannot be unmade. That’s because the loans that were consolidated have been paid off and no longer exist. Take the time to study your consolidation options before you submit your application. This checklist has been designed to help you determine whether and how you should consolidate your loans.”

I hope that helped, good luck!