Office of Financial Aid
Student Loan Consolidation
Student Loan Consolidation
Federal Loans
(e.g. Stafford, Perkins, PLUS, Grad PLUS, Direct Unsubsidized Loans converted from TEACH Grant)
Consolidating federal student loans is one way to simplify payments and manage debt. Only loans that are for the same borrower can be combined into a single loan with a fixed interest rate. The interest rate of the new loan is based on the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest 1/8 percent, never exceeding 8.25%.
- Borrowers cannot consolidate loans with their spouse.
- Parents cannot combine their PLUS loans with their student’s federal loans.
- Private loans cannot be consolidated with federal loans.
Advantages
- Convenience of one monthly payment
- Longer repayment period – determined by how much you owe, maximum 30 years
- Lower monthly payments – extended repayment period results in lower monthly payments
- Payment flexibility – deferment and forbearance options available
- No credit checks (except PLUS loan consolidation may require credit check)
- No fees or prepayment penalties
- Fixed interest rate
Disadvantages
- Total cost – longer repayment period results in more interest paid
- No grace period – repayment begins immediately
- Higher interest rate – weighted average of interest could result in slightly higher interest rate
- Loss of benefits – could lose subsidized interest, deferment or loan forgiveness benefits if consolidating loans such as Perkins or Nursing loans
For
more detailed information about Federal loan consolidation, please visit the Federal Student Aid website, the FinAid.org website, or the Federal Direct Consolidation Loan website.
Please Note: Most
FFELP lenders are no longer offering consolidation loans because these loans
are no longer profitable. Students can still consolidate their loans with the
US Department of Education's Federal Direct Loan Consolidation program at loanconsolidation.ed.gov even if they only have FFELP loans.
Private Loans
Private loans cannot be consolidated together with federal loans and a credit check is required.
Advantages
- One monthly payment
- Extended repayment period
- Possible lower monthly payments – dependent on credit score at time of application
- No prepayment penalties
Disadvantages
- Possible higher interest rate – dependent on credit score at time of application
- Loan is not forgiven upon borrower’s death
- No hardship or forbearance options
- Processing fees – amount determined by lender
- Loan origination fees – amount determined by lender
Current lenders that offer private consolidation loans are:
For more information about private loan consolidation, go to www.finaid.org/loans/privateconsolidation.phtml