Consolidation Loan

A Federal Family Education Loan Program (FFELP) Consolidation Loan is designed to help student and parent borrowers consolidate several types of federal student loans with various repayment schedules into one loan. When eligible loans are consolidated, repayment periods may be extended and total monthly payments may be lower. However, due to the extended repayment period, the total amount that you will pay over the life of the loan is increased. With a FFELP Consolidation Loan, you'll make only one payment a month.

Consider Before Consolidating

Interest Rate
- The interest rate for your FFELP Consolidation Loan is the weighted average of the current interest rates of the loans that are consolidated, rounded up to the nearest 1/8 of 1%, not to exceed 8.25%. The interest rate will not be variable, but remains fixed for the life of the loan.
  - Fixed Rate Loans - If your interest rates are currently fixed, you can choose to consolidate at any time during your grace or repayment period. Keep in mind that, due to rounding up to the nearest 1/8 of 1%, your new interest rate will be higher than your current rate.
  - Variable Rate Loans - If you have variable rate loans, you may wish to wait to see if rates may lower before consolidating your loans. While there are no guarantees, interest rates are expected to drop significantly July 1, 2008.
- The federal government will pay the interest that accrues during periods of deferment on the portion of the consolidation loan that consists of subsidized loans.
- If any of your Stafford loans carry variable interest rates, you may wish to take advantage of the lower rates offered during grace and approved deferment periods by requesting your consolidation at that time.
Other Options
If you are considering consolidation as a way to lower your payment, you may wish to ask your lender about the availability of these alternate options:
- Automatic Payments - Some lenders offer discounts if you sign up for payments automatically withdrawn from your checking or savings account.
- Switching Repayment Plans – You may be eligible for a different repayment plan such as graduated, income-sensitive, income-based (available 7/1/09), or extended. More information on repayment plans is available here.
If you are having trouble making your payment, ask your lender about options such as deferment and forbearance.
Deferment, Cancellation, and Forgiveness Provisions You May Lose

Be aware that by consolidating your student loans, you may lose:

Some of your options for deferment.
Eligibility for certain cancellation and forgiveness programs, particularly if you choose to consolidate any Perkins loans.

Increased interest costs

It is important to understand that any time that you extend your repayment period, whether through consolidation, choosing a different repayment plan, or by obtaining a deferment or forbearance, you will pay more in interest charges over the life of the loan.

Think about all of these issues carefully before you decide to consolidate. Your lender can help you make the decision that's right for you.

Choosing a Consolidation Lender

Contact your lender directly to:

Learn more about the consolidation program, including availability, loan terms, and repayment incentives
Apply for your consolidation loan

Another option you may wish to consider is the Federal Direct Consolidation Loan Program (1-800-557-7392).

Understanding Consolidation Loan Requirements

You can consolidate any eligible loans that have entered repayment or that are in a grace period. If any loan you want to consolidate is in default, you must make satisfactory repayment arrangements on that loan before it can be included in the consolidation.

Knowing the Types of Loans That Can Be Consolidated Under a FFELP Consolidation Loan:

As the borrower, you can choose to have any of the following loan types included in a consolidation loan:

Subsidized and Unsubsidized Federal Stafford Loans
Federal PLUS Loans (as the borrower)
Federal Perkins Loans
Federal Supplemental Loans for Students (SLS)
Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)
Health Education Assistance Loans (HEAL)
Nursing Student Loans (NSL)
Federal Insured Student Loans (FISL)
Direct Subsidized and Unsubsidized Loans
Direct PLUS Loans
Federal Consolidation Loans

However, keep in mind that you may choose to consolidate only some of your loans. For example, you may wish to leave any Perkins loans out of your consolidation loan to maintain the forgiveness options on those loans.

To view your loans with EAC, log in now. To locate other student loans, visit Mapping Your Future's Loan Locator page at http://mappingyourfuture.org/paying/locatingloans.htm.

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