Student Accounting

Loan Consolidation Information

What Is It?

A consolidation loan allows students to combine their federal student loans into one single loan, hence one monthly payment. The payment can be significantly lower since the repayment term will be longer.

The interest rate for the loan will be based on the weighted average of the interest rates on the loans to be consolidated.

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Considerations

Keep in mind that consolidation is your individual choice. It is your responsibility as the loan borrower to research and understand the rights and responsibilities of the loan you will be taking on. Below are some questions to help you decide if consolidation and the lender are right for you:

  • How does consolidation benefit me?
  • If I go back to school, can I get a student deferment?
  • Can I consolidate just one loan? What benefits will I lose if I consolidate?
  • What will happen to any additional loans that I receive after I consolidate?
  • If I earn interest rate reductions (rebates), will they be transferred to a new lender if my loan gets sold?
  • What would my consolidation interest rate be? Can I refinance if I get more loans?
  • What additional interest rate reduction incentives do you offer?
  • Are there any costs or fees to consolidate with this particular consolidation servicer?
  • Will consolidation keep me from getting additional financial aid?
  • How long will it take to process my consolidation request? When should I start my consolidation application?
  • Will I be penalized for paying off early or making more than the minimum payment?

Although consolidating your loans can simply your life by lowering your monthly payments, it can also significantly increase the total amount paid back due to longer repayment term. Once you have consolidated, it cannot be undone since the new lender will have paid off your prior loan balances to start repayment with them.

By consolidating, you may lose some of the rights of your old loans, so ask which ones would no longer be applicable.

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How To Apply

Consolidation can be done through the Department of Education or a private lending institution. The university does not endorse any particular consolidator; it is the borrower's responsibility to determine which is best for them. By using the online calculator that is available at most consolidator's Web sites, you can determine which one may offer the best interest rate or repayment benefits.  The information below is specifically regarding the Department of Education's Direct Consolidation Loan Program.

For information about loan consolidation through the Department of Education, please visit the StudentLoans.gov. You can use their interactive loan calculator to find out how much your monthly loan consolidation payments will be. Use the calculator with and without your Federal Perkins Loans to determine if your monthly payment will be reduced and which option would be more cost effective. Please note that if you consolidate your Federal loans, you will lose any Perkins cancellation benefits (i.e., Teacher, Volunteer, Law Enforcement forgiveness benefits) that may apply for certain occupations. Similarly, if you consolidate your Health Professions loan, you will lose deferment options specific to that loan fund.  Perkins and Health Professions loans will need to be consolidated into a Federal Direct Consolidation Loan if you want to make them eligible for the Federal Public Service Loan Forgiveness program or any of the federal repayment plans.  Private or outside agency loans are not eligible for consolidation with the Direct Consolidation Loan program.

Once a loan consolidation application has been received, the lender will verify the outstanding balances from loans that the student has requested to be consolidated. They will then send out information regarding the successful completion of the consolidation, the interest rate, amount owed, etc.

Once you have successfully consolidated your educational loans you have a 180-day window to include additional loans in your consolidation package.

Completing a request to consolidate loans does not commit you to going through with the consolidation. You will be required to sign a final consolidation promissory note. It is important that you review your loan consolidation paperwork carefully to be sure all of your loans are included. The consolidation process isn't final until you complete, sign and return this paperwork.

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