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Applying and Qualifying for the Federal Perkins Loans

For the college bound student looking for financial aid, qualifying for a grant is ideal. But, not all grants will cover the entirety of your tuition costs. When you factor in book costs, dorm fees and the cost of living in general most grants fall short of the mark when it comes to paying all of your college expenses. That’s why student loans play such a major role in financing a college education.

Federal students loans, with their fixed low interest rates and flexible repayment plans, offer the most attractive solution. The Federal Perkins Loan Program should be a key component in any student’s college financial plan. The Perkins loan offers many benefits and features that make it an excellent source of financial aid for eligible students.

Features of a Perkins Loan:

  • Low-interest, fixed rate loans
  • Need-based
  • Available through participating colleges and universities
  • Optional loan cancellation for eligible borrowers
  • Available to eligible undergraduate and graduate students
  • 9-Month grace period
  • No application fees
  • No credit checks

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What is a Federal Perkins Loan?

The Federal Perkins Loan is a campus-based financial aid package that is available to both undergraduate and graduate students. Participating colleges and universities receive annual loan allowances from the U.S. Department of Education, and it is from theses funds that the school makes Perkins Loans available to eligible students. These loans are limited number and eligible students are advised to apply early. Perkins loans are free of any application or other hidden fees and offer a 9 month grace period following graduation before repayment must begin.

Perkins Loan recipients borrow directly from the college campus of their choice. These are subsidized loans, meaning the government pays the interest that accrues on the loan for as long as a students remains in school as well as the 9 month grace period. Under graduate students are limited to loans of $4,000 per year, with a lifetime limit of $20,000. Graduate students are allowed an increased limit of $6,000 per annum, with a $40,000 lifetime limit.

While many students qualify for the Federal Perkins Loan, not all colleges and universities participate in the program. Check with your college of choice to learn if they are one of the approximately 1700 colleges and universities that do participate in the program. With it’s fixed low interest rates, Federal subsidization and flexible repayment terms the Perkins Loan is the most borrower friendly student loan available.

Qualifications for a Perkins Loan

The chief determining factor of a student’s eligibility for the Perkins Loan program is financial need. A student must fall within a certain income bracket and the student’s Expected Family Contribution or EFC must be rated low on the Federal scale. Other application requirements include:

  • Student must be enrolled in an accredited school at least half-time.
  • Student must be enrolled in a college or institution that participates in the program.
  • Student must be a U.S. citizen, a legal permanent resident or an eligible non-citizen.
  • Student must no history of defaulting on prior student loans.
  • Student must be registered with the Selective Service where applicable.
  • Student must meet minimum GPA.

Federal college loans

Applying for a Perkins Loan

All Federal financial aid programs require students to fill out and submit the Free Application for Federal Student Aid or FAFSA. Once you have submitted your FAFSA and it has been reviewed, you will receive your Student Aid Report which details the amount of your Expected Family Contribution (EFC). This is the amount of money you or your family are responsible for contributing to your education.

Within a few weeks, you should receive follow up letters from the colleges to which you have applied detailing any and all types of financial aid for which you have qualified, including the Perkins Loan. This letter must be returned to the college or university indicating what financial aid you are accepting. If you are approved for a Perkins Loan you must coordinate with your school immediately to secure the loan and receive your financial aid money. Loan funds are limited and the earlier you respond the better your chances of getting the loan you need.

Repayment of the Perkins Loan

During the final weeks of your college term your school will contact you and provide loan repayment details relative to your Perkins Loan. You will have the benefit of a 9 month grace period in which to become settled and find a job before any repayment schedule begins. This grace period is one of the major bonuses of the Federal Perkins Loan program, allowing students some time to enter the workforce before any loan payments must be made.

Loan Cancellation for Teachers

A significant benefit of the Federal Perkins Loan program is the Cancellation or Deferment Option for Teachers. Students who agree to take up full time teaching positions in low-income public school districts, or take positions teaching in certain subject areas may be eligible for cancellation or deferment of all or part of your Perkins loan. Check with your college for more information regarding any deferment or loan forgiveness programs for which you may be eligible.


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Federal Student Loans

Federal student loans may be offered as part of your school’s financial aid offer. These loans have many benefits—like low interest rates that remain fixed (unchanged) for the life of your loan. If you have financial need, the U.S. government may even pay the interest on your federal student loans while you’re enrolled in school.

Remember: You’ll still need to pay back these loans, with interest. So be sure to look carefully at the loan type and payment terms—and compare to other loans like VSAC’s Vermont Advantage Loans—before deciding whether to accept the offer. And remember—always borrow only the amount you need.

Also, be sure to keep track of the loans you’re taking out as you go along—especially if you choose to postpone payments. Make a list of the loan type, principal balance, and interest rate. This information will come in handy if you later want to consolidate your loans or explore your eligibility for income-driven repayment plans.

Learn more about these federal student loans:

FEDERAL PERKINS LOANS FOR STUDENTS

Federal Perkins Loans are low-interest student loans available to undergraduate, graduate, or professional degree students who:

  • Demonstrate exceptional financial need
  • Are enrolled in college or a career training program full- or part-time
  • Are enrolled in a school that offers Federal Perkins Loans
  • Meet other eligibility criteria

Your school will determine if you are eligible for a Federal Perkins Loan, based on the information reported in your Free Application for Federal Student Aid (FAFSA) and sometimes other factors. If you are eligible, the school will include a Perkins loan in your financial aid offer.

Tip: Accept a Perkins loan first—if it’s offered. Perkins loans offer benefits, including:

  • No loan fees
  • A low fixed interest rate
  • Government subsidy during school and for the first 9 months after you leave school, and during periods of deferment

FEDERAL DIRECT LOANS FOR STUDENTS

Federal Direct Loans are available for undergraduate, graduate, or professional degree students who are enrolled in college or a career training program at least half-time (at least 6-8 credits per semester).

There are 2 types of Federal Direct Loans: Subsidized and Unsubsidized.

Federal Direct Subsidized Student Loans

Federal Direct Unsubsidized Student Loans

You must demonstrate financial need to qualify.

You do not need to demonstrate financial need to qualify.

The U.S. Department of Education will pay the loan’s interest while you’re in school at least half time, for the first 6 months after you leave school, and during any periods of deferment.

You are responsible for paying the loan’s interest, as soon as the loan is disbursed.

4.45% fixed rate (July 1, 2017 – June 30, 2018) for undergraduate students

6.00% fixed rate (July 1, 2017 – June 30, 2018) for graduate or professional students

1.069% (Oct 1, 2016 – Sept 30, 2017)

1.066% (Oct 1, 2017 – Sept 30, 2018)

  • Payment suspension and government subsidy while enrolled in school and during 6-month post-enrollment grace period
  • Payment suspension and government subsidy also available during periods of deferment in addition to income-driven plans
  • Payment suspension while enrolled in school and during 6-month post-enrollment grace period
  • Payment suspension also available during periods of deferment in addition to income-driven plans

Your school will determine if you are eligible for a Federal Direct Subsidized or Unsubsidized Loan—or a mix of both—based on the information reported in your Free Application for Federal Student Aid (FAFSA) and sometimes other factors. If you are eligible, the school will include 1 or more Federal Direct Loans in your financial aid offer.

FEDERAL DIRECT PLUS LOANS FOR GRADUATE PROFESSIONAL STUDENTS OR PARENTS

Federal Direct PLUS loans are available to:

  • Graduate or professional students who:
    • Are enrolled at least half-time in an eligible school in a program leading to a graduate or professional degree or certificate
    • Do not have an adverse credit history
    • Meet the general eligibility requirements for federal student aid

Tip for graduate students: You may want to consider accepting a Graduate PLUS loan—if it’s offered—because of its flexibility. Grad loans have low fees, fixed interest rates, and flexible payment suspension options.

  • Parents who:
    • Are taking the loan out for an undergraduate student enrolled at least half-time in an eligible school
    • Do not have an adverse credit history
    • Meet the general eligibility requirements for federal student aid (both parent and student)

Tip for parents: A Parent PLUS loan offers some benefits—including flexible payment suspension options. Many education lenders offer loans with lower interest rates and fees than the federal government. Review your options and find what is best for your family situation.

Comparing the Direct PLUS Loan for Graduate Students vs the Direct PLUS Loan for Parents

Direct PLUS Loan for Graduate Students


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Student Loan Consolidation

Student loan consolidation is a good option if you are having trouble paying your loans. You can consolidate just one loan, or several loans. You can consolidate loans even if you re already in default. In fact, consolidation is one good way to get out of default. (To learn about other ways to get out of default on student loans, see Student Loans: Getting Out of Default.)

A consolidation loan allows you to combine your federal student loans into a single loan with one monthly payment. This may be a good option if any of the following are true:

  • You can t afford the monthly payments on your federal student loans under any of the options described in Student Loan Repayment Options, and don t qualify for a postponement or for loan cancellation.
  • You qualify for some of the payment plans described in Student Loan Repayment Options, but you are so deep in debt that you still can t afford your monthly payments.
  • You can afford your monthly payments and intend to pay off your loans under a standard plan, but you want to refinance at a lower interest rate.
  • You are in default on one or more of your student loans and want to get out of default.

Eligibility for Student Loan Consolidation

The vast majority of federal loans are eligible for consolidation, including subsidized and unsubsidized Stafford loans (GSLs), Direct loans, Supplemental Loans for Students (SLSs), Perkins loans, FISLs, and (except in an IBR Plan Consolidation Loan) PLUS Loans. (To find out what type of loan you have, see Types of Federal Student Loans.)

All borrowers with these loans are eligible to consolidate after they graduate, leave school, or drop below half-time enrollment. However, because consolidation loans have no grace period while you are in school or for the six months afterwards (unlike nonconsolidation loans, which usually do have a grace period during this time), getting a such a loan may not be a good idea if you are still in school or just graduated and don’t yet have a job.

Restrictions

Tthere are some restrictions to loan consolidation. Private student loans cannot be included in a federal consolidation loan. In addition, spouses cannot consolidate their loans into a single consolidation loan. And, borrowers who are in default must meet certain requirements before they can consolidate.

Pros and Cons of Consolidation

Consider both the advantages and disadvantages of consolidation before obtaining a consolidation loan.

Disadvantages to Consolidation

Potential disadvantages include the possibility that, if you have old loans, consolidation will cause your interest rate to go up. Moreover, consolidation will extend the repayment period, which means that you will pay more interest over the life of your loan. Consolidation will not completely clean up your credit report, either. If you were in default, your report will reflect that your previous loans were in default but are now paid in full through the new loan.

In addition, your right to assert a school-related claim against the lender of the consolidation loan is not clear. That right might be important, for example, if you got a loan to attend a for-profit school because it lied about the likelihood of you getting a job after graduation. If you think you have a claim against the school, it is better to consult an attorney experienced in bringing these kinds of cases before you consolidate your loan.

To find an experienced student loan lawyer, visit Nolo’s Lawyer Directory.

Advantages to Consolidation

Loan consolidation offers some potential advantages, too. If you are in default on any of your government loans, consolidation may offer the opportunity to get out of default and make affordable monthly payments. When interest rates are low, consolidation gives you the advantage of locking in a low rate on your student loans.

Direct Consolidation Loan Program

As with the Direct Loan Program, the federal government provides Direct Consolidation Loans.

Direct Consolidation Loans come with flexible repayment options, including a standard plan, a graduated plan, and an extended plan, and in most circumstances an Income Contingent Repayment Plan (ICRP) or an Income Based Repayment Plan (IBR). To learn about these, see Student Loan Repayment Options.

If you are in default, a Direct Consolidation Loan is a good way to get out of default and obtain a repayment plan that you can afford. In order to get out of default through a Direct Consolidation Loan, you must make three affordable monthly payments to the loan holder first (which can be as low as $5) or agree to an ICRP or IBR on the consolidated loan. Borrowers are also eligible for deferments in certain circumstances.

Each loan consolidated under the program keeps its interest subsidy benefit. This can be important if you return to school.

To qualify for a Direct Consolidation Loan, you must have at least one Direct loan or FFEL. So, if you have only a Perkins loan, for example, you don t qualify. If you have at least one FFEL, but no Direct loans, then you must certify you are unable to obtain a FFEL with an Income Sensitive Repayment Plan acceptable to you and are eligible for an Income Contingent Repayment Plan. As of 2010, there are no more FFEL Consolidation loans available, so the requirement that you cannot get one may be moot.

For more information on Direct Consolidation Loans and to get an application for loan consolidation, go to http://loanconsolidation.ed.gov/index.html.

Reconsolidation

The circumstances under which you can consolidate a loan or loans that have already been consolidated are limited. Here are some examples of when you can reconsolidate a student loan:

  • If you apply within 180 days after you get a consolidation loan, you can add another loan (either a new or existing loan) into that consolidation loan.
  • You can get a new consolidation loan to combine an existing consolidation loan and another student loan you got either before or after you got the original consolidation loan.
  • You can consolidate two existing consolidation loans.
  • FFEL Consolidation Loan borrowers may also convert a FFEL Consolidation Loan into a Direct Consolidation Loan, without having to add any additional loan, in order to obtain an Income Contingent or Income Based Repayment Plan, but only if the lender submitted the loan to the guaranty agency to help the borrower avoid default.

To learn about student loan repayment options, getting out of default, and more, see Nolo’s Student Loan Debt area.


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Federal student loan consolidation

Student Loan Consolidation

Consolidation Loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. They also provide an opportunity for alternative repayment plans, making monthly payments more manageable.

Consolidation loans are available for most federal loans, including Stafford, PLUS and SLS, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well.

The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent. That interest rate is fixed for life.

For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.

If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 3.86%), the weighted average is

This weighted average, 4.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 4.25%.

If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don’t be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.

No Cost to Consolidate

Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate.

Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an upfront fee. If someone wants you to pay an upfront fee, chances are that it is an example of an advance fee loan scam.

Who Can Consolidate

Both student and parent borrowers can consolidate their education loans. Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.

Students can consolidate their education loans only during the grace period or after the loans enter repayment. Loans that are in default but with satisfactory repayment arrangements may also be consolidated. Students can no longer consolidate while they are still in school. Parents, however, can consolidate PLUS loans at any time.

Which Loans Can be Consolidated?

Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan.

You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself.

Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan.

Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment.

Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased.

You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan.

Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for a deferment or forbearance.


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Student Loan Debt Consolidation

Student Loan Consolidation is available to help students reduce their federal education debts by combining all of their outstanding loans into a single loan.

WHO IS ELIGIBLE FOR A CONSOLIDATION?

Consolidation Loans are available to most borrowers of Federal education loans and come from one of two sources. Direct Consolidation Loans and Federal Consolidation Loans.

WHAT IS CONSOLIDATION

The Financial meaning of the term: Taking Multiple debt or credit lines and consolidating them into one new payoff plan. Frequently, this is a consolidation loan, provided to consolidate debts into one loan with one payment.

WHY CONSOLIDATE

Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

GREAT REASONS WHY TO CONSOLIDATE

One Lender and One Payment
Repayment Options
No Minimum or Maximum Loan Amounts
Reduced Monthly Payments
Strengthen Your Credit

Seeing that there is a mountain of student loan debt saddling recent and older graduates, there have been many programs made available to help those struggling with student loan debt.

We can help choose the best repayment option for your situation

Standard Repayment

With the standard plan, you’ll pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50, and you’ll have up to 30 years to repay your loans with a fixed interest rate. The standard plan is a good fit for you, if according to your budget the IBR, ICR and PAYE plans are higher in monthly payment, as the standard plan does not account for your finances.

Graduated Repayment

With this plan your payments start out low and increase every two years. The length of your repayment period will be up to 30 years. If you expect your income to increase steadily over time, this plan may be right for you. Your monthly payment will never be less than the amount of interest that accrues between payments.

Income Based Repayment Plan (IBR)

Under this plan the required monthly payment will be based on your income during any period when you have a partial financial hardship. Your monthly payment may be adjusted annually. The maximum repayment period under this plan may exceed 25 years. If you meet certain requirements over a specified period of time, you may qualify for cancellation of any outstanding balance of your loans.

Pay As You Earn (PAYE)

On December 2012 the DOE announced that borrowers with Federal Student Loans may now be able to take advantage of a new repayment plan that could lower their monthly federal student loan payments. The plan, known as Pay As You Earn, caps monthly payments for many recent graduates at an amount that is affordable based on their annual income. This new option follows through on President Obama’s promise to provide student graduates with relief on their student loan payments and help them responsibly manage their debt payments.

Income Contingent Repayment (ICR)

  • This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse’s income if you’re married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:
    1. the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
    2. 20% of your monthly discretionary income.

If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized. The maximum repayment period is 25 years. If you haven’t fully repaid your loans after 25 years under this plan, the unpaid portion will be discharged. You may, however, have to pay taxes on the amount that is discharged.


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How and When to Combine Federal Student Loans Private Loans

Got student loans? We ve got you covered with our Student Loan Smarts blog series. Our expert tips and hacks will help you save money, pay off loans sooner and stress less about student loan debt. Read the other posts in the series here—and get all the info you need to make intelligent decisions about your student loans. And while you re at it, check out SoFi s new Student Loan Debt Navigator tool to assess your student loan repayment options.

One of the biggest student loan myths out there is that borrowers can’t consolidate federal student loans and private student loans into one loan. It’s understandable why people think that, since this wasn’t an option for many years. But now that the choice is available, it’s important to understand whether federal and private loan consolidation is right for you – especially when there’s the potential for significant cost savings on the line.

Can I Consolidate Federal and Private Student Loans?

While it’s not possible to use the federal Direct loan consolidation program to combine your federal student loans with private loans, it is possible to combine private and federal student loans by refinancing them with a private lender. Through this process, you actually apply for a new loan (which is used to pay off your original loans) and you’re given a new—ideally lower—interest rate.

Why would you want to do this? In addition to the advantages of loan consolidation (like having one, simplified monthly payment), refinancing student loans at a lower interest rate can mean big benefits, like lowering monthly payments or reducing the time it takes to pay off your debt, and cutting down on the total interest you pay over time.

When to Consolidate Federal Student Loans Private Loans

Before you refinance federal student loans, there are a couple of things to think about. Here’s an easy decision tree to help you understand whether refinancing federal loans is right for you:

Should I Refinance My Federal Student Loans?

Federal student loans

Federal Student Loan Interest Rates, Revealed

Some people assume that federal loans always offer the best rates, but this just isn’t true.

Depending on loan type and disbursement date, your federal student loan rate could range from about 3% to 8%. With prevailing interest rates at historic lows, some private lenders offer rates that are significantly better than a high-rate federal loan. This is particularly true for grad school borrowers who use unsubsidized Direct loans and Graduate PLUS loans to finance their education.

So how important is interest rate, really? Let’s compare a 10-year term, $80,000 loan at 6.84% (the current fixed rate on Grad PLUS loans) and 5.68% (the average 10-year fixed interest rate for SoFi refinance borrowers in 2015).*

In this example, refinancing would mean both lower monthly payments and a total savings of more than $5,600.

Understanding Federal Student Loan Benefits

Some federal student loans offer benefits and protections that do not transfer to private lenders. This is often the reason that people cite when they say you shouldn’t combine federal and private loans. But before you dismiss the idea of refinancing, you should first take a look to see if any of these benefits apply to you.

For example, under the Public Service Loan Forgiveness Program (PSLFP), your Direct Loan balance may be eligible for forgiveness after 120 payments if you’ve worked in the public sector that entire time. Similarly, the Teacher Loan Forgiveness Program is available for teachers who work in schools that serve low-income families full-time for five consecutive years. These are clearly great programs for people who choose careers in public service or education, but if that’s not you, they won’t do you any good.

There are also a number of federal loan repayment plans that can ease the burden for borrowers facing tough economic times. For example, the government’s Pay As You Earn (PAYE) and Income-Based Repayment (IBR) programs allow borrowers to make reduced monthly payments based on financial hardship. But if your income is over a certain threshold, you won’t benefit from these programs. And if you do qualify, but you’re at the high end of the spectrum, your slightly lowered payments may come at a disproportionate price in the form of accumulating interest.

It’s important to note that some private lenders offer their own benefits and protections. At SoFi, for example, if you lose your job, we’ll not only pause your payments, we’ll help you find a new one .

Federal Loan Refinance Recap

Combining federal student loans and private loans through the refinancing process won’t make sense for every borrower, but it provides great benefits for some. Now that you know it’s an option and you understand how it works, you can better assess whether it’s right for you.

* Click here to see student loan refinance examples that depict APR, monthly payment and total finance charges.

Editor’s Note: This is an updated version of a post we originally published in December 2013. We welcome new comments and questions below.

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Student Loan Consolidation: What Are the Pros and Cons, Money, federal consolidation loan.#Federal #consolidation #loan


Should I Consolidate My Student Loans?

College students can take out new loans each year they re in school, so by the time graduation comes, it s common to have half a dozen, or more, individual loans. Each of them may have different terms, including interest rates.

Consolidating those loans into a single new one can simplify your payments, especially if your loans are with different loan servicers, the companies that oversee your payments. It can also be a way to get into repayment plans you otherwise wouldn t be eligible for.

But that doesn t mean consolidation is always a smart move. Here are four things to consider before you make the leap.

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1. Consolidation won t save you money.

One of the myths of consolidation is that it makes your debt less expensive by lowering your interest rate. Historically, that may have been accurate, since consolidation was often used as a way to lock in a low interest rate on variable-rate loans, says financial aid expert Mark Kantrowitz. But that hasn t been the case for the past decade, since the government stopped issuing student loans with variable rates.

If you consolidate your loans now, your new rate will be based on a weighted average of all your loans interest rates. So, for a simplified example, if you have two loans, one for $10,000 at 4% interest and one for $5,000 at 6%, your consolidated loan will have a $15,000 balance and a 4.7% interest rate.

By combining your interest rates, you also lose the ability to employ a favorite tactic of financial planners for paying down debt: targeting the most expensive debt, the loan with the highest interest rate, first.

What s more, consolidation typically results in the borrower paying more in total interest because consolidated loans are generally stretched out over a longer period, says Jessica Ferastoaru, a student loan counselor with Take Charge America.

2. Consolidation usually gives you more repayment options, but it can limit them too.

Consolidation is often the first step borrowers must take to enroll in some of the government s more flexible repayment plans, including income-driven plans, many of which are restricted to borrowers with Direct Loans.

Borrowers who graduated before 2010, when the government shifted to Direct Loans, for example, need to consolidate their loans to access the latest income-driven plan, Revised Pay As You Earn. Parent PLUS borrowers most consolidate their loans into the federal Direct Loan program if they want to enroll in the only earnings-based plan available to them, income-contingent repayment.

Consolidation also opens up the door to extended repayment plans, in which your term can stretch up to 30 years depending on how much debt you have.