Who considers consolidation?
Any student who has borrowed from more than one lender for a subsidized or unsubsidized student loan may benefit from consolidation.
What is consolidation?Consolidation is the process of combining several federal educational loans into a single account called the Federal Direct Consolidation Loan. Some examples of student loans which are eligible for consolidation are the following:
Federal Stafford Loans (formerly Guaranteed Student Loans)
SLS (Supplemental Loans for Students)
Federal Direct Loans (subsidized and unsubsidized).
Federal Perkins Loans (formerly National Defense Student Loans)
>A word about Federal Perkins Loans - If you choose to consolidate your Federal Perkins Loan, please be advised that you may forfeit your 9-month grace period and your interest rate will be that of the Stafford Loans.
When do I consolidate?The best time to consolidate is during your last semester of school, after the last disbursement of your loan while you are still enrolled. Most students do not begin consideration of consolidation until graduation when their lenders are contacting them regarding repayment of their loans.
Note: If you are close to paying off your student loans, it may not be worth the effort to consolidate or further extend your payments.
Where do I consolidate?If you currently have an outstanding Federal Direct Loan, you can receive a consolidation brochure by calling the Direct Loan Servicing Center's Consolidation Division at 1-800-557-7392 or by visiting your Financial Aid Counselor in the financial aid office. You may also apply online for a Direct Consolidation Loan, or download and print a paper application from that site.
After you complete and submit the packet, it generally takes 90 days to complete the consolidation process. The result is a letter informing you that you have a Federal Direct Consolidation Loan.
You may also consider consolidating with other non-federal vendors. We recommend that students compare consolidation programs carefully before making a decision.
Why should I consolidate?Convenience is the most popular reason to consolidate. By having all of your student loans with one servicer, you can make one payment per month rather than two or three (depending on the number of previous lenders).
Also, it can sometimes be cheaper to consolidate, especially if some of your loans with previous lenders are at higher interest rates, or some of the loan balances with previous lenders are small (less than $3500), but still require the minimum $50 payment per month.
A word about Default:If you are in default, you may still consolidate your loans; however, your credit report will show a paid-in-full default entry. If you are in default and would like more information, call 1-800-621-3115.