Student Loan Consolidation

Combining various student loans taken out into a bigger one from a single lender, is referred to as Consoldating Student Loans. It is quite similar to refinancing a mortgage. Instead of managing different payments and interest rates of various loans, simultaneously, it is always suggested to combine the loans into a single loan at a new, fixed rate.

The advantages of consolidation are as follows :

  1. Interest rate will not change over time.
  2. Monthly payment is reduced, by extending the term of the loan.
  3. Indiviual will be responsible for a single account with a single financial institution.

The rate is equal to a weighted average of the interest rates on the existing loans rounded up to the nearest one-eighth of one percent.

Currently, interest rates for these variable loans are:

  1. Stafford Loans in grace: 6.62%
  2. Stafford Loans in repayment: 7.22%
  3. Stafford Loans in repayment prior to 7/1/98: 8.02%
  4. PLUS Loans: 8.02%
  5. Perkins Loans: 5%
  6. HEAL Loans: 4.125%
  7. Previous consolidations: existing consolidation rate

Following types of loans can be consolidated:

  1. Stafford Loans – Subsidized and Unsubsidized
  2. Federal Direct Stafford Loans – Subsidized and Unsubsidized
  3. HEAL/HPSL Student Loans
  4. Parent PLUS Loans
  5. Federal Direct Parent PLUS Loans
  6. Federal Consolidation Loans
  7. Federal Direct Consolidation Loans
  8. Perkins Loans
  9. Nursing School Loans

All studenst can consolidate their loans, except the married ones. This is so because, when married students consolidate their loans together, each of them becomes responsible for the full amount of the loan, and this amount cannot be separated if the couple gets divorce.

This consolidation can be done, during the grace period or after the loans enter repayment. It cannot be done, while they are still in school. It can be done towards the end of the grace period or after the loans enter repayment, and then be locked for the lifetime of the loan.

Any federal education loan can be consolidated. Even a single loan can be consolidated, but not by itself .However, there are a few limitations while consolidating a consolidated loan. The only thing you have to do is, to add loans that were not previously consolidated to the consolidation loan.