Q: What is loan consolidation?
Q: Are there any other advantages to loan consolidation?
Q: Are there any disadvantages to consolidation loans?
Q: What is the interest rate on consolidation loans?
Q: Can I consolidate loans with my spouse's loans?
Q: Which loans are eligible for consolidation?
Q: When does consolidation repayment begin?
Q: What repayment options are available?
Q: How long will my repayment period be under a consolidation
loan?
Q: What deferments are available?
Q: How do I decide if it makes sense for me to consolidate?
Q: How do I find an application?
Q:
What is loan consolidation?
A: Loan consolidation
allows you to combine all of your eligible student loans
into one loan. That way there is one loan, one lender,
and one monthly payment with a fixed interest rate.
Q:
Are there any other advantages to loan consolidation?
A: Yes. You can reduce
your monthly payment amount by choosing a repayment plan
with a longer repayment period for higher balance loans.
If you consolidate while a loan is in an in-school or
grace period status, you may benefit from a lower fixed
interest rate. In-school consolidation is only available
through Direct Consolidation Loans.
Q:
Are there any disadvantages to consolidation loans?
A: If you extend the
length of your repayment through a consolidation loan,
you will pay more interest over the life of your loan
since you will be making payments (principal plus interest)
over a longer period of time. Also, consolidation loans
have fewer payment deferment options than some underlying
loans. If you qualify for one of the many loan forgiveness
options under some loan programs, such as Perkins loans,
you should probably not include those loans in your consolidation.
Contact your lender for more information.
Q:
What is the interest rate on consolidation loans?
A: The interest rate
on consolidation loans is calculated by taking the weighted
average of the interest rates of the loans being consolidated,
rounded up to the nearest 1/8 percent. This rate is fixed for the life of the loan.
Q:
Can I consolidate loans with my spouse's loans?
A: It is possible
to consolidate loans with your spouse; however, there
are some facts to consider before making a spousal consolidation
loan. Under a spousal consolidation loan (combining the
loans of a married couple into a single consolidation
loan), both the husband and wife are legally responsible
for repaying the loan. This joint legal responsibility
for repaying a spousal consolidation loan can result
in difficult and unfortunate situations, especially if
the couple divorces.
Q:
Which loans are eligible for consolidation?
A: You can consolidate
the following: Federal Direct Subsidized and Unsubsidized
Loans, Federal Subsidized and Unsubsidized Stafford Loans,
Federal Perkins, Federal Insured Student Loans, Federal
HEAL, Health Profession Student Loans, Loans for Disadvantaged
Students, National Defense Student Loans, National Direct
Student Loans, Nursing Student Loans, Federal SLS, Federal
ALAS, Federal PLUS, and Federal Consolidation Loans.
Q:
When does consolidation repayment begin?
A: Normally, your
first payment is due 60 days after your consolidation
loan is originated. However, consolidation can be a lengthy
process, particularly if you have loans held by several
different lenders. You must continue to make any required
payments on your existing student loans until consolidation
is completed.
Borrowers who are eligible for an in-school
consolidation loan with Direct Loans will begin repayment
after their six month grace period expires.
Q:
What repayment options are available?
A: First you should
check with your lender to see what is available. For
most lenders, you have four options: a level repayment
plan with equal monthly installments, a graduated repayment
plan with smaller monthly payments in early years and
increasing payments in later years, an income-sensitive
repayment plan with payments adjusted annually based
on your income, or an extended payment plan, if available.
Q:
How long will my repayment period be under a consolidation
loan?
A: It depends on the
amount of your student loan indebtedness. The more you
owe the longer the repayment period. It can vary from
10 years to 30 years. Check with the lender for more specific information.
Q:
What deferments are available?
A: Most lenders offer
education-related deferments, unemployment deferments
or economic hardship deferments. Check with the lender
for more specific information.
Q:
How do I decide if it makes sense for me to consolidate?
A: Since everyone's
situation is different, there is no single answer to
this question. You may contact your MU Financial Aid
Advisor or your current lender(s) to help you with this
decision. Questions you should ask yourself are:
• Can you afford your current loan payment?
• How much are you willing to pay over the long
term?
• What is the current interest rate on your loans?
• What deferment options are available with my
loans?
• What repayment benefits are available with my
lender(s)?
Q:
How do I find an application?
A: You should contact
your lender for an application. Many lenders offer interactive
applications on their web sites or you may be able to
download an application. Make sure you do research on
each of your lenders to find the best option for you.
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