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Loan Consolidation

About Loan Consolidation

Loan Consolidation is an option available to student loan borrowers that allows them to extend their repayment term and to merge several types of federal student loans with varying repayment terms and interest rates into a single loan. This option may not be desirable to every borrower and may not be available to you on all of your loans.

The loans eligible for loan consolidation are: Federal Subsidized and Unsubsidized Stafford Loans, Direct Subsidized and Unsubsidized Stafford Loans, Federal PLUS Loans, Direct PLUS Loans, Federal SLS Loans, Federal Consolidation Loans, Direct Consolidation Loans, Federal Perkins Loans, Federal Nursing Student Loans, Health Professions Student Loans, Health Education Assistance Loans.

A borrower must be in the grace period or have entered repayment on each loan chosen for consolidation. If any of these loans are in default, they are eligible for consolidation only after the borrower makes either satisfactory repayment arrangements with the holder of each defaulted loan or the borrower agrees to repay the consolidating lender under an income-sensitive repayment schedule.

Interest Rate

The interest rate on a consolidation loan varies depending on the origination date of the loan.

  • Fixed: (Portion attributed to FFELP, FDLP, FISL, Perkins, HPSL, or NSL Loans) Weighted average of the interest rates on the non-HEAL loans being consolidated, rounded up to the nearest one-eighth of one percent, not to exceed 8.25%
  • Variable: (Portion attributed to HEAL loans, if applicable). Average of the bond equivalent rates of the 91-day Treasury bills auctioned for the quarter ending June 30, plus 3.0%.

If HEAL loans are included in your Consolidation loan, the portion attributed to the HEAL loan will receive a variable* interest rate.

*All variable interest rates are adjusted annually on July 1.

Click here for an example of the interest rate calculation.

Click here for more information on interest rates. Please note several loan programs currently carry a variable interest rate that is adjusted July 1 of each year.

Repayment Terms

A consolidation loan enters repayment on the date the loan is disbursed. Repayment must begin within 60 days from the date the consolidation loan is disbursed. The repayment term is determined by the sum of the Consolidation Loan balance plus the balances of other education loans, and is as follows:

  • Less than $7,500.00: 10 years;
  • $7,500.00 or more, but less than $10,000: not more than 12 years;
  • $10,000.00 or more, but less than $20,000.00: not more than 15 years;
  • $20,000.00 or more, but less than $40,000.00: not more than 20 years;
  • $40,000.00 or more, but less than $60,000.00: not more than 25 years;
  • $60,000.00 or more: the term is 30 years.

Deferment

Consolidation loan borrower's deferment eligibility is based on the following factors:

  • The date the borrower's Consolidation loan is made.
  • Whether the borrower included all his or her outstanding FFELP loans in the Consolidation loan.
  • The deferment eligibility established with the borrower's underlying loans.
  • The extent to which the borrower has already obtained deferments (and depleted deferment eligibility). Generally, deferments are borrower-specific.

Forbearance:

Federal Consolidation loan borrowers remain eligible for all types of forbearance. Forbearance provisions for Consolidation loan borrowers are the same as those for Stafford, Plus, and SLS loan borrowers.

For more information, please refer to the Deferment and Forbearance Eligibility Chart.

Pros of Consolidated Loans

  • Able to consolidate several types of student loans. See eligible loan programs under the "What is a Consolidation Loan" heading.
  • Choose to consolidate all loans or just some loans.
  • Fixed interest rate is calculated using the weighted average interest rate of the underlying loans rounded up to the nearest one-eighth of one percent. These loans will not exceed 8.25%. Portion attributed to HEAL loans is variable.
  • Maximum repayment term is 30 years depending on type of repayment plan chosen and/or amount of money being consolidated.
  • 4 available repayment plans for you to choose from:
    • Standard: Monthly payment amount is fixed over the life of the loan.
    • Income Sensitive: Monthly payments are based on your earnings and change with changes in your income.
    • Graduated: Monthly payments start low and gradually increase over the life of the loan.
    • Extended: Allows you to extend your payments over a 25-year period under a level or graduated repayment schedule if your loans total more than $30,000.
    • Availability of discharge due to school closing or false certification.
  • Availability of deferment and forbearance options.
  • One lender/servicer and one monthly payment, eliminating the need to make multiple payments to multiple lenders.
  • Consolidation loan can be consolidated with additional qualifying loans.
  • May reduce monthly payment amounts:
    • At least $50 per month for standard repayment.
    • May be lower for graduated and income-sensitive repayment.
    • Monthly payments cannot be less than the accruing monthly interest.
  • Ability to change repayment options.
  • Interest subsidy continues for subsidized Stafford loans during authorized deferment periods.
  • May be allowed to consolidate defaulted loans.
  • No minimum loan amount.
  • No limit on the number of loans that may be consolidated.

Cons of Consolidated Loans

  • Longer repayment period.
  • Loss of some borrower benefits (such as certain deferment options or forgiveness options).
  • No grace period before repayment begins. If you consolidate during the grace period, you lose any remaining portion of your grace period.
  • Cannot consolidate same loans at a later date unless additional qualifying loans are added.

Click here for a chart of the Pros and Cons of Loan Consolidations.