Heather Jarvis provides an enlightening video discussion on why advisors should be cautious about recommendation student loan consolidations.
Consolidation should be done only when there is a very good reason and you only get one shot so Heather recommends you keep you options open until you have a specific reason such as when positioning for Public Service Loan Forgiveness.
The professional advisor should evaluate the borrower's circumstances before executing a consolidation loan. Here are some considerations that may or may not apply to their situation.
- Consolidations can eliminate some key benefits such as interest rate reductions that borrowers of FFEL loans may have gained.
- Consolidations may trigger capitalization of unpaid interest, raising the total balance due.
- Be cautious of consolidations if you have ParentPlus loans.
- Make sure a borrower can truly benefit from a consolidation such as when they are positioning for Public Service Loan Forgiveness.
- Consolidations should be use only for a specific purchase and well thought out before moving forward.
- Consumers can consolidate online at no charge.
- If consumers want to find third party help for questions about consolidation or any other matter related to their student loans, proceed with caution. To download a document on how to evaluate a financial professional to work with student loan matters, click here.
The CSLP Program contains extensive information on student loan consolidations.
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