An important student loan forgiveness deadline is hours away — and it takes under 15 minutes to apply

Personal finance

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Some student loan borrowers have until the end of Tuesday to take advantage of an opportunity to get their debt forgiven sooner than they would have otherwise.

Borrowers with multiple student loans who request a so-called loan consolidation the end of the day on April 30 — a move that will combine their federal student loans into one new loan — may benefit from the Biden administration’s temporary policy.

Applying for consolidation is a straightforward process: It should take under 15 minutes to fill out the forms, said Jane Fox, the chapter chair of the Legal Aid Society’s union.

Here’s what borrowers should know ahead of the deadline.

Bundling your loans could bring you closer to relief

Many former students have multiple education loans, either because they borrowed on repeated occasions throughout college or returned to school at some point. If these borrowers are enrolled in an income-driven repayment plan, it can mean that they’re also on multiple different timelines to forgiveness. (Depending on the plan, borrowers can get any remaining debt excused after 10, 20 or 25 years.)

Under the temporary policy, borrowers who consolidate will get payment credit on all their loans based on the timeline for the one they’ve been paying on the longest.

“This will ensure folks get the maximum number of months of credit towards student debt cancellation,” Fox said.

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Consolidating while this policy is in place could be an especially good deal for many, experts say.

For example, say a borrower graduated from college in 2004, took out more loans for a graduate degree in 2018, and is now in repayment under an income-driven plan with a 20-year timeline to forgiveness.

Consolidating before May 1 could lead them to quickly qualify for forgiveness on all those loans, experts say, even though they’d normally need to wait at least another 14 years for full relief.

“Many borrowers will get complete debt cancellation, particularly those who have been paying for over twenty years,” Fox said.

Usually, a student loan consolidation restarts a borrower’s forgiveness timeline to zero, making it a terrible move for those working toward cancellation.

What to know about consolidating your student loans

All federal student loans — including Federal Family Education Loans, Parent Plus loans and Perkins Loans — are eligible for consolidation, said higher education expert Mark Kantrowitz, in a previous interview with CNBC.

You can apply for a Direct Consolidation Loan at StudentAid.gov or with your loan servicer.

“So long as the application is submitted by April 30, they should be fine, even if the servicers take longer to process it,” Kantrowitz said.

Some borrowers who took out small amounts may even be eligible for cancellation after as few as 10 years’ worth of payments, if they enroll in the new income-driven repayment option, known as the SAVE plan.

Consolidating your loans shouldn’t increase your monthly payment, since your bill under an income-driven repayment plan is based on your earnings and not your total debt, Kantrowitz said.

The new interest rate will be a weighted average of the rates across your loans.

Before consolidating, try to get a complete payment history of each loan. In doing so, according to experts, you can make sure you’re getting the full credit you’re entitled to.

You should be able to get a history of your payments at StudentAid.gov by looking into your loan details. You can also ask your servicer for a complete record.

If a borrower believes there is an issue with their payment count, they can talk to their loan servicer or submit a complaint with the Department of Education’s Federal Student Aid unit.

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