Student Loan Consolidation
Click here to view the Student Loan Consolidation Workshop Presentation
Consolidation Loan
What is the Federal Consolidation Loan?
The Federal Consolidation Loan allows borrowers to combine all of their federal loans into one new fixed rate loan. Interest rates are still very low, and borrowers who consolidate before July 1, 2006 will be able to lock in a fixed interest rate that may be as low as 4.75%
Why should I consolidate my loans?
Student loan consolidation allows you to:
- Lower your monthly payments by as much as half
- Lock rates as low as 4.750% for the life of the loan
- Pay your loan off early with no penalties
- Extend your repayment period up to 30 years
- Have a convenient single source of student loan repayment
Consolidation decreases the likelihood that a borrower will miss a payment, helping you maintain a strong credit rating. If you consolidate with a private lender, all of your loans will be on one statement.
What happens if I consolidate after July 1, 2006?
On July 1, the rates on all student loans will change, and will most likely increase significantly. Consolidating before July 1, 2006 locks in this year’s low interest rates. Be aware that once you consolidate, your loans go into repayment and you lose the remainder of your grace period.
Is there a deadline to consolidate my loans?
No, you can consolidate your loans at any time. Keep in mind that if you consolidate after July 1, 2006 it is likely that your interest rate will be higher than it would be if you consolidated prior to that date. The choice is yours.
Brandeis is a Direct Lending school. Are there different rules for direct loans?
Students at Direct Lending schools have the benefit of being able to consolidate while in-school. Consolidating before you graduate will allow you to keep your entire grace period. If you choose another lender you will have to wait until you are out of school, and you will lose the remainder of your grace period. However, other lenders may offer discounts and repayment incentives you won’t get in the Direct Lending program. You should make your choice after weighing out keeping your grace period versus some interest rate discounts, and decide which is more attractive to you.
Because your loans are in the Direct Lending program, you have the ability to consolidate with whichever lender you would like. Because the federal government sets the interest rates for consolidation loans, you should choose your lender based on customer service and reputation. Be wary of high-pressure sales calls and other aggressive tactics. Remember, you will be working with this organization for as long as 30 years so choose wisely.
How much does it cost to consolidate my loans?
There are no fees for borrowers who wish to consolidate their loans.
Can I change my mind after my loans are consolidated?
No. Once your loans are consolidated the process cannot be reversed and you cannot reconsolidate, even if rates drop.
If my loans are in repayment, do I have to make payments while the loans are being consolidated?
It is important that you continue to make all of your regular payments on the loans that you are consolidating until you receive your new loan repayment schedule in the mail.
How do you determine my new interest rate?
You will receive a fixed interest rate on your loan, based on the weighted average of the interest rates of the loans you are consolidating, rounded up to the nearest 1/8th percent or 8.25%, whichever is less. To estimate your new interest rate please visit online calculators, such as uconsolidate.org.
The government will still pick up the interest on the portion of your consolidated loan that was originally subsidized as Stafford Loans. Perkins and Federal Nursing Loans lose their subsidy benefit after consolidation if you consolidate in FFELP. If you consolidate through the Direct Lending program, your Perkins Loan will remain subsidized during deferment periods.
Eligibility
Your loan balance must meet the lender’s minimum (varies by lender) and be in the grace period, in repayment, deferment or forbearance, and cannot be in default.
You can consolidate any of the loan types listed below.
- Federal
- William D. Ford Direct Loans (Subsidized and Unsubsidized)
- Parent Loans for Undergraduate Students (PLUS)
- Direct Parent Loans for Undergraduate Students (PLUS)
- Guaranteed Student Loans (GSL)
- Federal Supplemental Loans for Students (SLS)
- Federal Perkins Loans (NDSL)
- Health Professions Loans for Students (HPSL)
- Loans for Disadvantaged Students (LDS)
- Nursing Student Loans (NSL)
- Previous Consolidation Loans (if you have a new loan to add)
What if my spouse and I both have education loans we wish to consolidate?
Spouses can consolidate jointly. However, by consolidating jointly, you are both responsible for the ENTIRE amount in the event of disability, death or divorce. And in the case of deferment, you and your spouse will both need to meet the eligibility requirements. Consider this option carefully before jointly consolidating. After July 1, 2006, spouses will no longer be able to jointly consolidate.
What if I have already consolidated my loans?
You may add new loans to an existing federal consolidation loan or consolidate it separately, as long as the amount is above the lender’s minimum (not all lenders have a minimum). If you are just interested in obtaining a new fixed interest rate, you are not able to reconsolidate.
What if my loans are in a grace period?
You can apply for consolidation during your grace period. (Since Brandeis is a Direct Lending school, students have the option to consolidate before leaving school and retaining the full grace period.) HOWEVER, repayment begins as soon as the loan is consolidated (which may take 30 – 45 days). The benefit of consolidating in your grace period is that your interest rate is 0.6% lower than it will be in repayment. You may request that the lender hold your application until the end of your grace period, although you may not receive the lower pre-July 1 interest rate. Please note that may not give the consolidation lender enough time to process the consolidation loan before the grace period expires, and you may need to make payments until you receive a notice that your loan has been consolidated.
Can I consolidate my private and federal loans together?
No, because they are two different types of loans. Some lenders offer private loan consolidation, but this can be very expensive because of fees. Generally speaking, rates remain variable on private loan consolidation, so there is no significant reduction in monthly payments.
How do I add a loan to my consolidation that I forgot to add?
You can add new federal loans to your consolidation loan within 180 days by contacting your consolidation lender.
Repayment Plans
What are my repayment plan options?
The repayment term is 10 to 30 years depending on the amount of your total student loan debt, including any federal loans you are consolidating and private loans not eligible for consolidation. You are not obligated to take the longer repayment schedule, though.
- Standard: The same payment amount for the length of repayment.
- Graduated: Interest-only payments for the first two years, then principal and interest for the remainder of the loan (amounts change every two years).
- Income Contingent: Your payments will be adjusted annually and will be based on your income, your family size and your outstanding balance. Balances that remain after 25 years are forgiven and reported to the IRS as income. Contact your consolidating lender for more details. (Note: FFEL lenders offer income-sensitive repayment, which is similar, although there is no forgiveness of balances that remain after 25 years of repayment.)
- Extended Repayment: If you have loans totaling in excess of $30,000, you may repay over a 25-year period on a fixed or graduated payment plan. To qualify, you must have borrowed your first federal loan on or after October 7, 1998.
Repayment starts within 30 days of its funding date. Once your loan has been funded, you will receive a repayment schedule from your loan servicer.
Can I change my repayment plan in the future?
You can change your repayment term at least once each year. This flexibility allows you to adjust your payments according to your current financial situation.
Are there any penalties for paying off the loan early?
There are absolutely no penalties for paying off your loan early. You will only be charged the interest that has accrued to date.
Can I pay more than my minimum monthly payment?
You can pay more than your monthly payment at anytime. This will not accelerate your payment schedule.
Deferment and Forbearance
What if I need to defer my Federal Consolidation Loan?
You may defer your Federal Consolidation Loan if you meet the eligibility requirements for education reasons, unemployment, economic hardship or Peace Corps Service. Please contact your loan servicer to discuss your options and obtain the forms.
Can I get forbearance with my Federal Consolidation Loan?
You remain eligible for all types of loan payment forbearance as described in your original