Home > Financial Aid > Student Loans > Student Loan Consolidation

Student Loan Consolidation

Loan consolidation can simplify the loan repayment process by allowing the borrower to combine several types of federal student loans and repayment schedules into one. The repayment process is simplified because there is only one per month. The interest rate on consolidated loans is often lower than what is currently paid. Borrowers in default on a federal student loan are eligible for a consolidation loan if certain conditions are met.

Note that a lender cannot refuse to consolidate your loans because of

  • - The number or type of eligible loans the borrower wants to consolidate
  • - The type of school attended
  • - The interest rate that would be charged on a consolidation loan
  • - The types of repayment schedules available

Loans That Can be Consolidated

  • - Direct Subsidized and Direct Unsubsidized Loans
  • - Subsidized and Unsubsidized Federal Stafford Loans
  • - Direct PLUS Loans
  • - PLUS loans from the Federal Family Education Loan (FFEL) Program
  • - Federal Nursing Student Loans
  • - Supplemental Loans for Students (SLS)
  • - Federal Perkins Loans
  • - Health Education Assistance Loans (HEAL)
  • - some existing consolidation loans

Some private lenders also consolidate loans, but these cannot be consolidated with federal loans. The Loan Origination Center’s Consolidation Department offers a complete list of loans eligible for Direct Consolidation.

www.loanconsolidation.ed.gov

Consolidation Periods

Federal loans can be consolidated during periods of repayment, grace, deferment, and forbearance. Loans cannot be consolidated while the borrower is still in school. If you want to consolidate a defaulted loan, you have to either make satisfactory repayment arrangements on the loan with your current loan servicer before you consolidate, or repay your new Direct Consolidation Loan under the:

  • - Income-Based Repayment Plan
  • - Pay As You Earn Repayment Plan
  • - Income-Contingent Repayment Plan
  • Advantages vs. Disadvantages of Federal Loan Consolidation

    Advantages

    • - One Monthly Payment
    • - Lower Monthly Payments
    • - Longer Repayment Period
    • - Fixed Interest Rate

    Disadvantages

    • - Greater Total Money Repaid - Interest accumulated over a longer period when repayment period is extended.
    • - Loss of Borrower Benefits - Borrower loses cancellation benefits on Perkins Loan. Interest rate discounts and principal rebates can also be lost.

    Interest Rates and Fees

    The interest rate for federal loans is set according to a formula established by federal statute. The fixed rate is based on the weighted average of the interest rates on the loans at the time the borrower consolidates, rounded up to the nearest 1/8%. The interest rate does not exceed 8.25%. The consolidation rate is fixed for the life of the loan, which protects the borrower from future increases in variable rate loans but does now allow them to benefit from future decreases in variable rates. There are no application fees or prepayment penalties.

    Repayment

    • - Repayment begins within 60 days of the loan disbursement
    • - Payback term ranges from 10-30 years depending on the amount of educational debt being repaid and selected repayment options
    • - Loans can be repaid in a shorter amount of time is borrower chooses to do so
    • - Once consolidated, federal loans cannot be unconsolidated

Last Edited: December 2015

Latest College & Financial Aid News

Support Pets Prompt College Policy Re-evaluation

September 20, 2016

by Susan Dutca

Emotional support animals are able to attend select colleges with their owners, as schools are re-evaluating their campus policies when it comes to accommodating students with mental-health issues. Higher education institutions are also debating whether suicide-prone students should be given campus leave, in order to recover. Administrators are fighting to make decisions in the best interest of [...]

9/11 Memorial Flags Trashed at California College

September 13, 2016

by Susan Dutca

Vandals allegedly trashed the 2,997 American flags planted across Occidental College's campus as a 9/11 Memorial by the college's Republican Club. The broken and trashed flags were replaced by fliers that read, "RIP the 1,455,590 innocent Iraqis who died during the U.S. invasion for something they didn't do." The memorial, which was approved by, and registered with the college, was quickly [...]

Private Jet College Tours? Sure...If You Have $100K

September 6, 2016

by Susan Dutca

It's not feasible to do 10 campus visits in only 5 days - unless you're willing and able to pay for a private jet that costs more than college tuition itself. Magellan Jets offers a college tour package to "decrease both the headache and the time spent on college campus visits." So if you have $100,000 to spare, sit back, relax, and enjoy the refreshment bar as you soar to your next campus [...]

Follow Us:

facebook twitter rss feed