School Loan Consolidation
If you're having trouble making your loan payments, you may be able to get a school loan consolidation that combines multiple student loans into one, which could possibly lower your interest rate. The main benefit of a consolidation loan is the convenience of one monthly payment and one lender. You can take longer to repay the loan (up to 30 years) under certain plans, based on your total student loan debt.
Both federal and private loans can be consolidated. However, consolidation may significantly increase the total cost of repaying your loan. Much like a regular private loan, these loans also have repayment terms and rates. Carefully review your options before you apply. Note that private loans cannot be consolidated together with federal loans.
If you're thinking about a consolidation loan, consider the following:
- Will you lose any borrower benefits, such as interest rate discounts and principal debates?
- For Perkins loans, will you lose any discharge and cancellation benefits?
When can I consolidate my loans?
For both FFEL and Direct Loans you can consolidate: During your grace period Once you've entered repayment (the day after the end of the six-month grace period) During periods of deferment or forbearance.
How do I get a consolidation loan?
Contact your school, bank or lender to apply for a student loan consolidation.
What's the interest rate on a consolidation loan?
The interest rate for both Direct and FFEL Consolidation Loans is a fixed rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on all of the loans you consolidate, rounded up to the nearest one-eighth of one percent. These loans are sold on the basis that the interest rate will not exceed 8.25 percent.
For a private student loan consolidation, check the terms with your lender. By law, lenders must not charge a fee for a consolidation loan.
Remember, once you get a consolidation loan, it cannot be cancelled for any reason (unless repaid) because the underlying loans that were consolidated have been paid off and no longer exist.
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After reading Loan Consolidation | Learn About School Loan Consolidation, you should understand the details of loan consolidation. In the next section, Understanding Student Loan Default, learn what it means to default on a loan.