Debt consolidation usually results in one monthly payment that is much lower than the combined amount of all of your previous smaller debt payments. It’s quite common for debt consolidation to reduce total monthly debt service by 50% or more.

Unlike private sector debt consolidation, Federal Student Loan Consolidation does not incur any fees for the borrower; private companies make money on the loan consolidation by reaping subsidies from the federal government.

Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans and 9% for PLUS loans.

The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Once the student has consolidated their loans, the loans are set to a fixed rate based on the year they consolidated; reconsolidating does not change that rate.

At present, the average student is graduating with about $21,000 in debt.

If you default, it means you failed to make payments on your student loan according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe.

If you have federal loans through the Direct Loan program, you may qualify for an income contingent repayment plan. Your payments are based on your income and your debt load. Another relief program called an income-based repayment program works like the income contingent plan, but it’s more generous because you can make a higher income, yet pay less per month.

The loan terms on the two programs require payments for up to 25 years. After that time, the remaining debt will be forgiven. And if you work in the public sector — for example if you’re a teacher or a public defender — your student loan debt is forgiven after 10 years if you’re on one of these plans.

Private loans — which are more expensive than federal loans — now account for nearly one in every four dollars of student borrowing, according to a new study by the National Consumer Law Center.

If you’ve been paying your private student loans on-time for a few years, you may be able to get a lower interest rate if you consolidate them. Your interest rate is based on your FICO credit score. So, if your credit score is higher now than when you originally got your loan, you could save a lot of money.

If you can’t keep up with your student loan payments, take action. There are very severe penalties for defaulting on a student loan.

If you don’t make payments on federal loans for 270 days, the government can garnish your wages up to 15 percent and a portion of your social security may be withheld. Your federal and state income tax can intercepted and directed to your loan. You may not be able to renew your state professional license. And, you can be sued for the immediate payment of full loan amount. Plus, you’ll probably have to pay collection charges up to 25 percent.

Some private student loans will be put in default if you’re 30 days late making a payment.

Even if you declare bankruptcy, it is very difficult to get a student loan discharged.

If you’re having trouble making your payments, there are programs that can provide some relief.

An extended repayment plan could lower your payments while increasing the life of your loan up to 30 years. Just remember that stretching out your payments will increase the total amount you repay over the life of the loan.

Interest will continue to grow on loans that are not federally subsidized. For example, if you have $20,000 in debt in a standard 10-year repayment period and you stretch that out to a 20-year repayment period, you’ll be cutting your bills by 34 percent, but your interest will more than double over the life of the loan.

Keep in mind that these are steps you should take before you default on your loan. If your loan is already in default, you won’t qualify for deferments or forbearances.

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