Is Consolidation Right for You?

Student loan consolidation is a service widely advertised by the student lending industry that can sometimes be confusing for borrowers. You may even receive solicitations by mail or by phone from companies you have never heard of before. There are certainly benefits to consolidation, but their can also be underlying drawbacks, and our office wants to ensure you have the facts you will need to consider before consolidating your student loans.

Consolidation defined: A consolidation loan combines several student loans into one bigger loan from a single lender. The consolidation loan is used to pay off the balances on the other loans.

If you have multiple loan holders you can have the convenience of making just one monthly payment. Only federal loans can be consolidated, so students with private or institutional loans will still have to make those payments separately.
If you have loans with variable interest rates (taken out before Summer 2006), you can lock in with the current government rate. The rate is based on the weighted average interest rate of the loans being consolidated, meaning it may save you money not to consolidate lower interest loans, such as Perkins.
When consolidating you can set up lower monthly payments with extended repayment terms or graduated repayment plans. Longer repayment terms and/or graduated repayment plans mean more interest accrues over the life of the loan.
Consolidation is free and no fees will be assessed. Any borrower benefits attached to your original Stafford or PLUS loans will no longer be available, such as interest rate reductions or principle balance reductions.
Even after loans are consolidated, the borrower retains subsidy benefits; meaning that if that student goes into a deferment status, the government will again begin paying interest accrued on Subsidized loans. When consolidating, you may lose any cancellation benefits, such as with the Perkins loan.
If you consolidate variable rate loans while still in your grace period, you can lock in a rate for those loans that is approximately .5% lower than when in repayment. When consolidating you lose any unused grace period.

*For a quick and easy way to calculate your weighted average, go to:

 What types of loans are eligible for consolidation?

Direct Subsidized and Unsubsidized Loans
• Federal Subsidized and Unsubsidized Federal Stafford Loans
Direct PLUS Loans and Federal PLUS Loans
• Direct Consolidation Loans and Federal Consolidation Loans
• Guaranteed Student Loans
• Federal Insured Student Loans
• Supplemental Loans for Students
• Auxiliary Loans to Assist Students
Federal Perkins Loans
• National Direct Student Loans
• National Defense Student Loans
• Health Education Assistance Loans
• Health Professions Student Loans
• Loans for Disadvantaged Students
• Nursing Student Loans


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This page was last modified on June 7, 2017