Loan Consolidation
To finance your college education, you may find it necessary to borrow from more than one loan source or lender, resulting in the financial burden of multiple monthly payments. After you graduate or are no longer enrolled at least half-time, you may want to consider consolidating your loans which is a process where an approved agency pays off your existing loans and creates one new loan. In some cases, loan consolidation can be a practical student debt management tool. However, consolidation is not the best option for everyone. Keep in mind that you may lose deferment privileges and pay back more in interest over time.
Loan Consolidation Basics
Federal and private consolidation loans allow you to reduce your monthly student loan payments by extending your repayment terms and may allow you to obtain a better fixed interest rate. When you consolidate, your consolidation loan lender pays the outstanding balances on the loans you consolidate. In essence, you refinance your education debts.
Federal Student Loans:
Consolidation is available to most borrowers of federally funded educational loans including:
Federal Direct Stafford Loan (subsidized and unsubsidized)
Federal Perkins Loan
Federal Direct Parent Loan (Parent Loan)
Federal Insured Student Loans (FISL)
Federal Supplemental Loan for Students (SLS)
Primary Care Loans, formerly known as Health Professional Student Loans (HPSL)
Health Education Assistance Loan (HEAL)
Nursing Student Loan Programs
Auxiliary Loans to Assist Students (ALAS)
Federal consolidations loans have no fees. To qualify for federal loan consolidation, borrowers must:
Be in their grace period or currently repaying their educational loans
Not be more than ninety days delinquent on educational loan payments
For more information contact:
Federal Direct Consolidation Loans Information Center at 1-800-557-7392
Private Alternative Student Loans:
- Alternative lenders may require you to be in active repayment before you can apply.
- Ask private lenders about possible consolidation loan fees or other costs before you apply.
- Most lenders do not consolidate federal loans together with private loans.
To determine the interest rate, loan consolidation agencies weight the average of all the loans included in the consolidation, rounded up to the nearest 1/8 of a percent.
Typically, borrowers may prepay all or part of consolidation loans at any time without a penalty.
Loan Consolidation Agencies
There are many lenders that will offer you consolidation options. However, the most stable consolidation option for federal student loans is through the Federal Direct Loan Program. You may also want to contact your lender or servicer to discuss other repayment options. If you do not know your lender(s), access your federal loan information through the National Student Loan Date System (NSLDS).
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