Consolidate student debt for Public Service Loan Forgiveness

Last month our guest blogger Heather Jarvis wrote about what the debt ceiling deal means for student loans. Now she’s back with more advice for student loan borrowers and the people who love them. Here are excerpts from her post The Scoop on Student Loan Consolidation at


"College Tuition Guy." Photo: Joselito Tagalau (Flickr/Creative Commons)

Q. Why would I consolidate my student loans?

Heads up, government and nonprofit workers: consolidation can get your federal loans into Federal Direct, and only Federal Direct loans are eligible for Public Service Loan Forgiveness [PDF]. Consolidation allows you to group your loans together with one lender, and can give you access to a longer repayment period and lower monthly payments.

Bear in mind that the longer it takes you to pay off your debt, the more interest you will pay over time, and extended repayment isn’t necessarily the best repayment plan.  I encourage borrowers with relatively high student debt-to-income ratios to consider the advantages of the Income-Based Repayment plan (like the interest subsidy and forgiveness provisions).

Q. Which loans can I consolidate?

Under the Direct Loan Consolidation Program, you can consolidate just about every type of federal student loan (including Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Perkins Loans). But I cover three major caveats on my blog – check it out here.

Q. How do I consolidate?

Get all your ducks in a row:

Need more info? Read the full Scoop on Student Loan Consolidation on Heather’s blog for more about interest rates and when to consolidate.

Are there other topics you’d like Heather to cover? Leave a comment and let us know!

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Comments (12)

  1. College Students for Reform writes:
    September 2, 2011 at 12:55 pm

    But Heather, what about private loans? Who takes care of those who are so stuck and drowning in student loan debt because of private loan lenders like Sallie Mae who won’t allow you to consolidate and who actually make money if you don’t? Heather, please sign our petition!

  2. Talisha writes:
    September 2, 2011 at 6:45 pm

    You’ve left out the best feature of consolidation through the program, loan-forgiveness; for those who are employed in a governmental position (whether city, state or federal), or for a non-profit company, upon completion of 10 years in payment status under the Direct Consolidation program, the remaining balance of student debt will be forgiven. Note that there will be a tax-due to the irs on whatever remaining balance there is on the loan is that is being forgiven.

  3. Heather Jarvis writes:
    September 5, 2011 at 1:06 pm

    Talisha, Actually, Public Service Loan Forgiveness will not be taxable as income, although 25-year Income-Based Repayment forgiveness is taxable under current law. There is more detail on tax consequences on my Tools page

  4. Heather Jarvis writes:
    September 5, 2011 at 1:08 pm

    I am not a big fan of private student loans and always recommend that they be avoided! I’m with you College Students for Reform. I had some fun with a recent anti-private student loans blog post here:

  5. Rafael writes:
    September 6, 2011 at 4:19 am

    good post…

  6. Marcel writes:
    September 7, 2011 at 10:25 am

    I think that high debt lead to problems for students after the studies.
    Unfortunately, there is often no alternative.

  7. Why Bother? writes:
    September 8, 2011 at 6:29 pm

    Dear Ms. Jarvis & Idealist Team:

    I’m having one serious issue with this program. There is a major discrepancy when it comes to the policy regarding the use of a Segal AmeriCorps Education Award in one lump sum. Based on the actual legislation (34 CFR § 685.219(c)(2)), there is an exception to the 120 separate payments rule for borrowers in AmeriCorps and Peace Corps positions. The exception reads as follows:

    “(2) If a borrower makes a lump sum payment on an eligible loan for which the borrower is seeking forgiveness by using all or part of a Segal Education Award received after a year of AmeriCorps service, or by using all or part of a Peace Corps transition payment if the lump sum payment is made no later than six months after leaving the Peace Corps, the Secretary will consider the borrower to have made qualifying payments equal of the lesser of–
    (i) The number of payments resulting after diving the amount of the lump sum payment by the monthly payment amount the borrower would have made under paragraph (c)(1)(iv) of this section; or
    (ii) Twelve Payments.”

    (34 CFR § 685.219(c)(2)

    Okay, this is a HUGE deal. For those of use who have completed up to two years of National Service, this means 24 less payments and/or two less years.

    Sounds great! The problem? No one within the Public Service Loan Forgiveness program will acknowledge this part of policy.

    I have called SEVERAL times to confirm this, but every time I have been transferred to ‘the supervisor’ (I have the names of two for documentation) and each time they deny this aspect of the program. I have consolidated my loans but have not started this program because of this issue. Not only does it contradict legislation, but it is a major turn off that no one working within this program seems to know the legitimate services of the program. How can I trust that this program will be around in ten years to see my loans forgiven if it can’t even function in a basic and consistent way? Am I totally wrong about this? I went as far as to fax all of my documentation to one of the supervisors, giving her my number and e-mail. Of course, I never heard a word in return. Every time I have called I have been told lump sum payments (of any kind, under any circumstances) will not count for more than one month/payment…end of story. Please advise!!!!!!!

  8. Heather Jarvis writes:
    September 10, 2011 at 7:55 pm

    I know you are frustrated. I am frustrated too. There are several things going on here. I expect that you are dealing with staff members of the student loan “servicing” companies. There are presently four companies that contract with the federal government to “service” federal student loans. They are borrowers’ primary source of information and we rely on them to answer our questions. Unfortunately, these folks don’t know everything and they make mistakes sometimes. It makes me crazy how often I hear from borrowers who are getting wrong information from a source they ought to be able to rely upon.

    Listen, you have read the regulation right. The regulation that was established by the Department of Education in order to administer Public Service Loan Forgiveness is clear: lump sum payments made with Segal Education Award dollars are to be treated differently than lump sum payments are typically treated. The servicers do not have the authority to establish the law. Usually, lump sum payments only count as one payment, but Segal Ed Awards are a special case, and apparently a special case that the folks you talked to are not trained up on.

    I recommend you contact the student loan ombudsman’s office with your complaint: I will also notify my contacts within the Department of Education.

    Let me know how it goes.

  9. Ramona writes:
    September 14, 2011 at 2:14 pm

    That was very informative! Thank you Heather.

  10. claudia writes:
    March 13, 2013 at 10:46 pm

    Hi Heather,

    Thank you for the information. I am currently gathering all of the information for my loans. I just can’t help but feel that I do not have enough of an understanding about my loans. So I am putting together an excel chart with info that I should gather and understand pertaining to my student loan history.

    Do you know of any tools, (ie: excel tables, calculators) that I could use. I feel Sallie Mae has used and abused my loans to their content, taking whatever little control I felt I had over them. I want to take back control! Thank you for the information it is just as relevant today as it was back in 2013. An update to this post would be great.

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    And on this post Idealists in Action

  12. Wilhelmina writes:
    January 13, 2014 at 12:41 pm

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    and wound up here Idealists in Action

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