Final call: This critical student loan forgiveness deadline ends today

If you have federal student loans that are not eligible for a debt relief program, today is your last chance to increase the amount of relief you have.

The Department of Education is reviewing past student loan payment counts as part of a one-time adjustment. This adjustment may increase the number of your payments, making you eligible for faster relief under a qualified income-based repayment plan or other programs such as Public Service Loan Forgiveness. Consolidation by June 30 can help apply these benefits to federal loans that were not previously eligible for the student relief program.

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

Experts say yes.

“The consolidation deadline for one-time IDR adjustments is not affected by the court ruling,” said Elaine Rubin, a higher education finance and policy expert and director of corporate communications at Editors. “The U.S. Department of Education will still calculate qualifying payments for eligible borrowers.”

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

read more: If you’re behind on 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 allows you to consolidate your existing federal student loans into a new loan with a fixed interest rate.

Why do you want to do this? If you hold FFELP, Perkins, and other indirect federal student loans, they may not be eligible for the forgiveness program. By consolidating them into a new direct loan and enrolling in an income-driven repayment plan, you may qualify for automatic loan cancellation, interest forgiveness, or other debt relief benefits.

If you qualify for the IDR program and have been paying for 20-25 years, your entire balance may be automatically forgiven.

There are other benefits to loan consolidation. Keeping track of one student loan instead of multiple student loans also makes it easier to manage payments. Depending on the payment plan you choose, a consolidation loan can lower your monthly payments but can also lengthen your repayment period. But if you qualify for forgiveness after the merger, this may not be as big of an issue.

Even if you already have a Direct loan, you may be in trouble from consolidating it if you have multiple Direct loans with different repayment start dates, says financial aid expert Mark Kantrowitz, a member of CNET Money’s Expert Review Board benefit from.

read more: Are you in default on your student loans? You may qualify for this debt relief program

If I consolidate my student loans, will my interest rate go up?

If your current federal student loan interest rate is low, in most cases you won’t have to worry about a new composite rate spike.

According to Federal Student Aid, the Department of Education’s official student loan website, the interest rate on your new direct consolidation loan will be based on the weighted average of your consolidated loans and will be rounded to the next 1/8th of 1 percent.

However, there is one exception. If you have an FFELP loan, you may lose some benefits when you consolidate. “The main problem is for borrowers where FFELP lenders are slashing interest rates,” Kantrowitz said. “These discounts are provided by the lender and disappear if you consolidate your loans.”

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

I don’t know if I qualify 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 can maximize your potential debt relief. This may be particularly advantageous if you currently hold federal student loans that are not Direct Loans. If any of your federal student loans have variable interest rates, consolidation can also help you lock in a fixed rate.

The latest student loan forgiveness programs take into account the date of your first student loan payment. Consolidating your loans helps ensure you have credit for your new direct loan starting with an earlier loan payment date.

So, let’s say you graduate college and make your first federal student loan payment in 2004. program, with a 20-year path to forgiveness, you may be eligible for 2004 loan forgiveness this year. However, consolidating your most recent loan with an older loan into a new direct loan could wipe out your entire balance for the year.

Even if you recently graduated, consolidating your federal loans and registering for IDR can help you get forgiveness faster. If you only have one student loan, if not a direct loan, you may also benefit from consolidation.

But if you don’t qualify for debt relief, it may not make sense to take this step. “If you are not currently seeking forgiveness of any kind (for example, not even seeking IDR forgiveness) and expect to never seek forgiveness, then you do not need to do this,” Kantrowitz said.

Will the June 30 deadline be extended?

Although the Department of Education extended the loan consolidation deadline from April 30 to June 30 this spring, experts do not expect another delay.

“The merger extension has not changed and is not expected to be changed or further extended,” Rubin said. If you could benefit from a consolidation loan, you’ll want to apply as soon as possible.

How to consolidate your student loans

You can consolidate your federal student loans online at StudentAid.gov. You need to submit your application by midnight local time on June 30 to meet the deadline. You can integrate after this date, but you’ll miss out on some benefits.

To fill out the application, you will need to provide your federal student aid ID, some personal information, financial information, and loan information. The FSA website says it takes about 30 minutes to complete a loan consolidation application.

You can fill out an application now by visiting studentaid.gov/loan-consolidation.

After filing, it can take up to 60 days for your merger to be processed, Kantrowitz said. At the same time, you may see your student loan payment count drop to zero. If this happens, don’t panic. This just means your adjustment count is being processed.

What happens if you miss a deadline?

If you consolidate your loans after the June 30 deadline, you can still get credit for past direct loan payments. But you probably won’t get as much credit. Instead, your payment count will be based on a weighted average or may be reset to zero. However, you can still get debt relief programs.