Loan consolidation offers federal student loan borrowers the opportunity to refinance all of your federal student loans and create a new fixed-rate loan with one manageable monthly payment, and possibly, an extended repayment term.
Because loan consolidation is not the only option for reducing your monthly payments, we recommend that you explore all available options.
"For federal loan borrowers who have recently graduated or left school, and who are in their grace periods, the interest rate has dropped from 3.5% to 2.88%. This is the lowest ever locked-in interest rate for consolidation loans. It is wise to consider consolidation at the end of the grace period, prior to repayment in order to lock-in the lower interest rate.
"For federal loan borrowers who are in repayment, the interest rate has dropped from 5.99% to 3.38%.
All federal loans are eligible for consolidation. You may apply for loan consolidation if you are in your grace period, or are in repayment and have made 3 monthly on-time payments with each federal loan that you plan to consolidate. Borrowers in default may also be eligible for consolidation after making acceptable repayment arrangements and making 3 monthly on-time payments.
Many lenders will have a minimum amount for consolidation, this amount varies by lender.
If you require a lower monthly payment, your lender may offer alternative repayment options.
If you are experiencing temporary difficulty in keeping up with your loan payments, several deferment and forbearance options are available, allowing you to reduce or postpone your monthly payments.
If you have multiple federal loan payments with multiple lenders, you may ask one lender to purchase the other federal loans to take advantage of loan serialization.
Four loan repayment plans are available: standard, graduated, income-sensitive and extended. You may change your plan once a year by contacting your lender. Most often, borrowers are provided with the standard plan unless another plan is requested.
The standard plan allows you to pay the same amount each month; at lease $50 per month, or the interest that has accrued - for up to 10 years.
The graduated plan allows you to start out with a small payment, which will increase after time. You have up to 10 years to repay.
The income-sensitive plan bases your payments on a percentage of your gross monthly income and the amount you borrowed, but it must cover at least the interest due. Repayment terms will be based on the percentage you request, your income and the loan amount.
The extended plan is for new borrowers (those who had no outstanding FFEL loans as of October 7, 1998, or those who had no no outstanding FFEL when they acquired new FFEL loans after October 7, 1998), who have more than $30,000 in outstanding loans. The payments can be fixed or graduated, with repayment up to 25 years.
To help you determine which of your loans are eligible for consolidation and what your monthly payment and interest rate would be, complete the following worksheet:
To determine your maximum repayment length, fill in these blanks:
Total dollar amount of eligible loans:
Total dollar amount of ineligible loans:
Is your ineligible total greater than your eligible total?
If yes,
multiply you eligible amount by two. Write the number here:
f no, add the
eligible and ineligible amounts. Write the total here:
In the box below, place a check mark in the "My Eligibility" column next to your total loan amount.
| My Eligibility | Loan Amounts | Maximum Term Lengths |
| Less than $7,500 | 10 Years | |
| $7,500 - $9,999 | 12 Years | |
| $10,000-$19,999 | 15 Years | |
| $20,000-$39,999 | 20 Years | |
| $40,000-$59,000 | 25 Years | |
| $60,000 and higher | 30 Years |
If you need information about your loans, you may access the National Student Loan Data system, the U.S. Department of Education's central database for all federal student aid records. Keep in mind that any private loans will not be listed here, nor will HEAL or any other Health Profession Loans, but you will still want to include them on the worksheet under ineligible loans.
Apply for a personal identification number (PIN) from the U.S. Department of education, if you do not already have one. You'll receive your PIN by mail within 7-10 days (or sooner by e-mail).
Go to NSLDS after receiving your PIN and click on the Financial Aid Review button. You will need o provide your social Security Number, the first two letters of your last name, your date of birth and your PIN.
Review your student loan information. You will see a listing of your federal student loans with the amounts, dates of origination and outstanding balances. To view detailed information about each loan, including the interest rate, click the number next to each loan.
You will have only one consolidation loan, unless you plan to consolidate both subsidized and unsubsidized loans.
While two separate loans will be established in your name (lenders are required to track these differently), your loans are combined for billing purposes, leaving you with a single monthly payment.
Typically, you may re-consolidate if you have at least one additional eligible loan, either in the grace period or in repayment, to consolidate. This additional loan may be yours or your spouse's. It may be a new loan or a loan that was not included on your first consolidation. Both FFEL and Direct consolidation loans are eligible for FFEL re-consolidation.
When you consolidate your loans, your new payment amount will depend on the amount being consolidated, the length of the repayment term, the interest rate of the consolidation loan and the repayment plan that you select.
your repayment term is based on your total student loan debt. Include your eligible and ineligible loans. the amount of ineligible loans cannot total more than the amount of eligible loans. Your monthly payments and the overall cost of the consolidation loan depend on the length of repayment -- the longer the repayment term, the lower the monthly payment, but the more you will pay in interest over the life of the loan.
your new interest rate is the weighted average of the interest rates in all the loans being consolidated, rounded up to the nearest one-eighth of one percent. the new interest rate cannot be higher than 8.25% and is fixed for the life of the loan. You may ask your consolidation lender to estimate you new interest rate.
Your new consolidation loan will have its own terms and benefits. For an FFEL Consolidation Loan, you must agree:
To notify your lender within 10 days of any change to your address, telephone number or name;
To pay principal and interest as scheduled, including any late fees;
To new deferment eligibility and criteria;
To have the interest capitalized if you fail to make the required payments of interest during periods of authorized deferment and forbearance;
That you understand your lender or guarantor will report the repayment, delinquency or default status of your loan to credit bureaus.
Yes, both options will be built into your consolidation loan to assist you in different situations.
Many lenders offer repayment incentives, usually in the form of lower interest rates, for on-time payments. Interest rates may also be reduced if you agree to "direct-pay" and have your monthly payments automatically withdrawn. You may save hundreds, even thousands of dollars by taking advantage of these incentives. Ask the lender for details before consolidating.
View your list of lenders by using the Loan Locator. Contact your lender for an application packet including the Federal Consolidation Loan Application and Promissory Note and instructions, as well as the Additional Loan Listing. READ ALL OF THIS MATERIAL CAREFULLY!
Interest rates are changed each July 1. Keep this in mind if applying near this date. It may be to your benefit to wait until the new interest rates are announced.
Once you sign and submit the application, you are bound to the terms of the new loan.
as 08/23/2003