Loan consolidation enables a borrower with federal student loans from different lenders to obtain one loan, with one interest rate and repayment schedule. The following loan programs can be consolidated:
- Federal Stafford Loans (subsidized and unsubsidized)
- Federal Perkins Loans
- Federal Supplemental Loans
- Federal PLUS Loans (parent loans made after 10-16-86)
- Health Profession Student Loans (HPSL)
- Federal Nursing Student Loans (NSL)
Loan consolidation is not for everyone. Consolidation loans are intended for those who need greater flexibility in repaying their student loans, or who seek to increase their monthly disposable income. Most borrowers do not consolidate their loans until their grace period ends. This allows borrowers the full benefit of their grace period.
Advantages of Loan Consolidation
- Extended repayment period up to 30 years.
- Lower monthly payment amount.
- Convenient single monthly payment.
- May help protect your credit rating.
Disadvantages of Loan Consolidation
- Extended repayment period adds to total interest expense.
- Interest rates may be higher than the rate of original loan.
- Federal Perkins Loan borrowers may lose eligibility to cancel their debt for full-time employment in certain occupations. Please refer to your original promissory note for more information on your cancellation benefits.
Eligibility for Loan Consolidation
- Must be in grace period or repayment status on all loans being consolidated.
- If in default, must have satisfactory arrangements to repay the defaulted loan.
- Must not have another consolidation loan application pending.
Generally, a borrower submits a consolidation application to a lender holding at least one of the loans to be consolidated. There are several companies that consolidate.