Now that the government will start collecting on defaulted student loans, a financial planner has advice to lower your monthly payment

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• The federal government will be resuming collections on defaulted student loans.
• Consolidating your student loans could reduce your payment if you're struggling.
• Look at the interest rates offered by both direct consolidation and private loans before deciding.

On May 5, the US government started the process of resuming collections on student loans in default, ending a five-year pause. If you're one of the 42.7 million Americans who have student loan debt — and especially if you're one of the many who can't afford loan payments — this probably isn't good news.

But don't panic yet. Rachel Gustafson, a CFP and certified college planning specialist with Financial Investment Team, says that student loan consolidation can help many borrowers. She explains who it's right for, the details on private versus federal consolidation, and how to start the process.

Consolidation could lower your monthly payments

Whether you should consolidate your loans depends on what type of student loans you have, your interest rate, and what your end goals are when it comes to your student loans, Gustafson says.

"If you have federal student loans, it could make sense to help lower your monthly payments or simplify your payments into one payment," she says. "It could also give you access to income-driven repayment plans or forgiveness. Usually, consolidation involves consolidating interest accrued into your loan, and you may pick up a higher interest rate to do so."

But if you have private student loans, consolidation will likely make sense if it lowers your interest rate or monthly payment. She explains that these types of loans usually don't have options like income-based plans, deferment, or forgiveness.

Putting it simply, if you're having trouble paying your student loans, then consolidation might be a good choice. "Consolidation is right for those struggling to make payments and needing to simplify things," Gustafson says.

Direct consolidation loans can be easier to handle

To consolidate several federal student loans into a single student loan, a direct consolidation loan is your best bet. "Direct consolidation loans for federal [student loans] are my preference since they give you access to income-based plans and/or forgiveness," she says.

While some income-based repayment plans are available, they may not be an option for long. Earlier this year, a federal court's injunction prevented the Department of Education from implementing the SAVE Plan and parts of other income-driven plans.

This loan application is available online and allows borrowers to consolidate their federal student loans into a single loan with a fixed interest rate. However, she warns that sometimes consolidation can result in a higher interest rate, especially in today's interest rate climate.

The process for consolidating private loans varies by lender. However, consolidation still offers many of the same benefits, such as potentially lower interest rates or monthly payments, plus the ease of having everything in one place.

You can also consolidate into a private loan

Gustafson warns against consolidating federal loans into private loans.

"You lose access to income-based plans, deferment, and potential forgiveness in the future. The only time I see this become an advantageous option is if the interest rates are lower on the private loans and/or you are aggressively paying down your student loans," she says.

Look at how your interest rates will change before making a decision

Before signing on the dotted line for a loan consolidation, consider the types of student loans you have (federal versus private), your current payment and interest rate for each loan, and whether you'll save or increase your current interest rate by consolidating.

Lastly, ask yourself whether consolidation is a necessity.

"If you can afford your payment currently and you aren't going to get a more advantageous interest rate or term by consolidating, it probably doesn't make sense for you to consolidate," Gustafson says. "If you are struggling to make your payments, an income-driven repayment plan might make sense, and there are several to choose from, and many give a certain level of forgiveness after a number of years."

This article was originally published on April 25.