Student Loan Consolidation Federal Loan Consolidation What is federal student loan consolidation? Federal student loan consolidation is a loan which combines your existing eligible federal student loans into a single loan. When you apply for a Federal Consolidation Loan (FCL), you are taking out a new loan to pay off all or a portion of your original eligible federal student loans. Currently, under the Federal Consolidation Loan program, the loan has a fixed interest rate which is calculated as the weighted average of the current interest rates of the loans being consolidated, rounded up to the nearest 1/8%. The repayment term can range anywhere from 10 to 30 years, depending on the amount being consolidated and the repayment options selected. What are the advantages and disadvantages of consolidating my loans? Advantages Fixed interest rate Lower monthly payment Pay only one bill to one lender for all federal loans Extend repayment period No prepayment penalties Multiple payment plan options Disadvantages Increased total cost of debt due to extended repayment period Lose any remaining grace period once loans are consolidated Perkins loans become unsubsidized and lose cancellation benefits if consolidated Possibility of higher interest rate if consolidating only fixed rate student loans Loss of some loan forgiveness provisions How do I qualify for a Federal Consolidation Loan? You must have at least one Direct or Federal Family Education Loan Program (FFELP) loan that is in grace, repayment, forbearance or default status. For a defaulted education loan to qualify for consolidation the borrower must make satisfactory repayment arrangements with the current loan holders or agree to repay their new Direct Consolidation Loan under the Income Contingent Repayment Plan. Students cannot consolidate while they are enrolled in school at a minimum half-time status. Students cannot consolidate private education loans into their Federal Consolidation Loan. Most federal education loans are eligible for consolidation, including subsidized and unsubsidized Direct and FFELP Stafford Loans, Graduate PLUS Loans, SLS, Federal Perkins Loans, Federal Nursing Loans, and Health Education Assistance Loans. Parent PLUS Loans (parents who borrow on behalf of the student) are also eligible for consolidation, but must be consolidated separate from the student’s federal loans. For a complete list of eligible loans, visit https://studentaid.ed.gov/sa/repay-loans/consolidation. How do I choose a lender to consolidate my federal loans? You may check with any lender to see if they participate in Federal Consolidation Loan Program. Keep in mind, however, that due to recent changes in legislation many lenders have opted to no longer offer these consolidation loans. Although many lenders may no longer being offering federal consolidation loans, you may be eligible to consolidate your loans under the Federal Direct Loan Program (see Resources section below for contact information). Before you choose your consolidation lender, you should carefully review their terms, conditions, and special benefit programs. Please note: Federal loan consolidation is not advantageous for every borrower. Make sure you are fully aware of all the terms and overall costs associated with a consolidation loan before you apply. Private Loan Consolidation What is private loan consolidation? There are two types of student loan consolidation - federal and private. Federal loan consolidation involves only federal loans (Stafford, Perkins, etc.) while private loan consolidation includes those student loans that are not eligible to be consolidated under the federal consolidation program. This also means that the low, fixed rate options available with federal consolidation are not available with private consolidation. Private consolidation loans, in general, have variable interest rates and may have fees associated with borrowing. What are the advantages and disadvantages of consolidating my private loans? Advantages Pay only one bill to one lender for all your private loans Possibility of lower interest rate – if credit score has improved since original private loans were disbursed. Lower monthly payment – depending on size of loan, you may be able to choose a longer repayment period. Disadvantages Increased total cost of debt due to possible extended repayment period Possible fees associated with consolidating private loans Possibility of higher interest rate – if credit score has declined since original private loans were disbursed, or different loan terms are offered How do I choose a lender to consolidate my private loans? You may check with any lender to see if they offer private student loan consolidation. Please note: Private loan consolidation is not advantageous for every borrower. Make sure you are fully aware of all the terms, overall cost and any fees associated with a consolidation loan before you apply. Resources NSLDS – National Student Loan Data System NSLDS is the central location for all of your federal student loan and Pell Grant information. This resource generally has the most complete and accurate information about your federal loans. Phone: 1-800-4FEDAID. Online: www.nslds.ed.gov. You must have your federal PIN to access your information on this system. This is the same PIN used to access FAFSA on the Web. If you do not have a PIN, go to www.pin.ed.gov to submit your request for a PIN. Direct Loan Origination Center Consolidation Department The Direct Loan Origination Center is your source to obtain information or to apply for a Direct Consolidation Loan of your federal student loans. Use the online calculation to get an estimate of your interest rate and monthly payment. Phone: 1-800-557-7392. Online: https://studentaid.ed.gov/sa/repay-loans/consolidation. For additional questions regarding your loans or to inquire about consolidation, contact your current lender.