CONSOLIDATION
Loan consolidation is a tool that may be helpful to you for successful management of your loan repayment responsibilities, but it is an individual decision that you'll want to think about carefully and research thoroughly because it has long-term implications. You cannot consolidate your federal loans while you are in school; you must wait until your loan is in repayment or until the loan is in the grace period that is provided following graduation or when your enrollment drops to less than half-time status.

If you are considering consolidation please note the following:

• FFEL / DIRECT LOAN CONSOLIDATION CONSIDERATIONS
  Due to several FFEL lenders suspending their participation in the federal consolidation loan program, please be advised that if you are unable to find a FFEL lender willing to consolidate your loans, you can obtain a Federal Direct Consolidation Loan.
  
  To be eligible for a William D. Ford Direct Consolidation Loan, you must have at least one of the following:
  
  1. A Direct Stafford subsidized or unsubsidized loan that will be included in the Consolidation loan; or
  2. Have at least one Federal Family Education Loan (FFEL) program Stafford subsidized or unsubsidized loan.
  INCOME SENSITIVE REPAYMENT
  If your current loan holder does not offer a Consolidation Loan or a Consolidation Loan with Income Sensitive Repayment terms acceptable to you, and you are eligible for Income Contingent Repayment, you may apply for a Direct Consolidation loan. In addition, if you have more than one FFEL loan, you may apply for a Consolidation Loan with any of your FFEL loan holders or through the Direct Consolidation Loan Program.


• PAST DUE LOANS
  Borrowers who are delinquent or in default must meet certain requirements before they may consolidate their loans. Contact your loan holder for more information.


• INTEREST
  A consolidation loan interest rate is based on the weighted average of the loans that are consolidated rounded up to 1/8 of a percent. Your interest rate can never exceed 8.25 percent. Borrowers who have variable rate Stafford and PLUS loans should wait until July 1, 2008 to consolidate their loans, as interest rates are expected to drop by at least 3% as compared with current rates.
  Stafford and PLUS Loans disbursed before July 1, 2006 have a variable interest rate. Click here for the current interest rate.

What Is a Consolidation Loan?
If you consolidate your federal student loans, they are paid off by a new federal loan created by the consolidating lender. A new federal loan that consolidates all of your individual loans is issued. You receive a new repayment schedule based on the size of your education loan debt, the loan interest rate and the repayment plan chosen. Your consolidation loan interest rate is based on the weighted average of the loans you are consolidating rounded up to 1/8 of a percent. Your interest rate can never exceed 8.25 percent. Standard, graduated, extended, and income-sensitive repayment schedules and deferment options are available on federal consolidation loans.


WHAT ARE THE POTENTIAL FINANCIAL IMPACTS OF CONSOLIDATION?


Potential Reduction of the Minimum Monthly Payment
The minimum monthly payment amount is typically lower than the total minimum monthly payments of loans that are not consolidated because the repayment term on the consolidation loan is often extended. Since you may be going from a 10-year repayment period to a 12-, 15-, 20-, or even a 30-year repayment period, you can anticipate a reduction in your minimum monthly payment.


Potential Increase in Total Interest Paid
By stretching out the repayment term, you will pay more in interest for your loan in the long run if you only make the minimum monthly payment. Consolidation loans don't carry a prepayment penalty, so if you consolidate and pay more than the minimum monthly payment, you could pay off your loan more quickly and reduce the total amount of interest over the life of your loan. Consolidation loan calculators (http://mapping-your-future.org/features/dmconsolid.htm) will help you to estimate the minimum monthly payment and identify the repayment term for a consolidation loan.


WHAT LOANS ARE ELIGIBLE FOR CONSOLIDATION?


Federal student loans such as Stafford, Perkins, Nursing and PLUS loans are eligible for loan consolidation. Private or alternative loans are not eligible for the federal consolidation loan program. Your U.S. Deptartment of Education loans are listed at the National Student Loan Data System. If you have been awarded a Nursing loan while attending SPU, you may review your nursing loan information at Campus Partners. If you have been awarded a Nursing loan while attending another school, please contact the financial aid office of that school.


HOW DO I CHOOSE A CONSOLIDATION LOAN LENDER?




You may pursue a consolidation loan with any FFEL lender. However, please keep in mind the following:
.	Due to several FFELP lenders suspending their participation in the federal consolidation loan program, please be advised that if you are unable to find a FFEL lender willing to consolidate your loans, you can obtain a Federal Direct Consolidation Loan.
.	The lender holding the majority of your loans will already have the majority of your loan information.
.	The consolidation loan product is a federal loan and will be the same loan with the same terms and conditions regardless of the lender you use. Lenders may offer different borrower benefits such as a reduced interest rate for establishing automatic direct draft payments for your loan. Please be sure that you fully understand the terms and conditions to receive any borrower benefits a lender may offer.
.	The levels of customer service provided by the lender including access to loan information online or by phone.



ARE THERE LOAN FORGIVENESS (CANCELLATION) BENEFITS FOR CONSOLIDATION LOANS?


A federal consolidation loan does not retain the Perkins loan forgiveness (cancellation) options. If you anticipate eligibility for Perkins loan forgiveness (cancellation) you may withhold the loan(s) from consolidation. In the future, if you don't qualify for forgiveness on the loan, or still have a balance remaining after maximum forgiveness has been received, you can consolidate the loan(s) and the existing federal consolidation loan. Please refer to your promissory note(s), contact your lender or servicer for your loan, or review the information provided at www.studentaid.ed.gov for more information about loan forgiveness.


PRIVATE CONSOLIDATION LOANS


Some lenders offer private consolidation loans. These private consolidation loans vary from lender to lender. If you think you may pursue a private consolidation loan, please be sure that you fully understand the calculation of interest, terms, and borrower benefits. Additional information regarding private and federal consolidation loans is available from FinAid.



Last Updated: 4/15/2008