Loan Consolidation

FEDERAL LOAN PROGRAMS

Federal Loan Consolidation

Federal loan consolidation is a repayment option whose popularity is growing due to the rise in student-loan interest rates.  Interest rates on Federal Stafford student loans disbursed before July 1, 2006, are variable and the annual rate is determined every July 1st.  Federal Loan Consolidation offers a fixed interest rate for the life of the loan.   

If you are thinking about consolidating your student loans we encourage you to take the time and get the facts you need to make an informed decision. 

Federal Loan Consolidation Facts

You can consolidate your Federal student loans once you are in “grace” or “repayment status”.  Parents can consolidate their Federal Plus loan after the loan has been fully disbursed and the loan is in repayment status. Most lenders require that you consolidate at least $7,500.00 in Federal Loans.

Loans that are eligible for Federal Loan Consolidation include:

• Federal Stafford Loan – both Subsidized and Unsubsidized

• Federal Plus Loan – Stafford and Plus loans can be consolidated together  only if you are the borrower of both.

• Federal Perkins Loan (not recommended due to loss of cancellation benefits)

• Federal Consolidation loans – You can consolidate your current Federal Consolidation loan only if you have borrowed a new Federal loan.

• Federal Supplemental Loans for Students (SLS)

• Federal Nursing Student Loans (NSL)

• Health Professions Student Loans (HPSL)

• HEAL Loans

Private Educational loans such as CitiAssist, Signature, Cal, PURL, etc are not eligible to be included in a Federal Consolidation Loan.  See the Private Loan Consolidation section below.

Federal Loan Consolidation Advantages

• Lower monthly payments – you will be able to lower your existing monthly payments by extending your repayment period from 10 to up to 30 years.

• Fixed interest rates – Consolidation rates are based on the weighted average of the interest rates of the loans you want to consolidate rounded up to the nearest one-eighth of 1 percent.  The rate can not exceed 8.25%.  The interest rate is fixed for the life of the loan. 

• Only one payment each month – you would only have to make one monthly payment if you consolidated Federal Stafford loans borrowed through multiple lenders.  You could also add your Federal Perkins loan to your Federal Consolidation loan to reduce your number of monthly loan payments.

• No prepayment penalties – you can prepay your Federal Consolidation loan in full or in part without penalty at any time during the life of your loan.

Federal Consolidation Loan Possible Disadvantages

• Possible increase in total interest paid since a Federal Consolidation generally extends your repayment term, it may increase the amount of total interest paid on the loan.

• Possible loss of some deferment or loan-discharge benefits – you will lose some of the loan-discharge benefits of the Federal Perkins loan if you consolidate the loan. You will also lose the interest subsidy benefits of your Federal Perkins loan if you include them in your Federal Consolidation loan.

• If you consolidate your educational loans during the six months after you leave school, you will forfeit your grace period. (Deferment or Forbearance of payment is offered however it is your responsibility to request it.)

• The initial consolidation loan payment will be due within 60 days after the consolidation loan is made unless the lender receives a deferment or forbearance request.

Click here to access your Federal loan totals. Click here to access the “Calculators” section of USA Funds website. You can estimate your current loan payments and you can also estimate your loan payments if you were to consolidate your Federal student loans. Make sure that you input your loan totals into both calculators and that you click on the “details” section. Then compare the total amount of interest paid for each repayment option. 

Listed below are some of the Federal Loan Consolidation providers that work with Pepperdine University Seaver College students and alumni and the links to their websites. 

Click here to connect to All Student Loan.

Click here to connect to Bank of America.

Click here to connect to CitiBank.

Click here to connect to College Loan Corporation.

Click here to connect to Sallie Mae (BankOne, Chase, Nellie Mae, Suntrust and Washington Mutual borrowers)..

Click here to connect to Total Higher Education.

Click here to connect to Wells Fargo.

Some of the information provided above was obtained from the USA Funds “Loan Consolidation – Is it the right option for you?” brochure.

Private Educational Loan Consolidation

Private Educational loans such as CitiAssist, Signature, Cal, PURL, etc are not eligible to be included in a Federal Consolidation Loan.  You could however consolidate your Private Education loans into a Private Educational Consolidation Loan.  Please note that you should not consolidate your Federal loans into a Private Consolidation Loan.  Federal loans carry specific benefits that would be lost if you consolidated them into a Private Consolidation Loan. 

Private Educational Consolidation Loan Advantages

• Lower monthly payments – you will be able to lower your existing monthly payments by extending your repayment period up to 30 years.

• Only one payment each month – you would only have to make one monthly payment if you consolidated various Private Educational loans borrowed through different lenders.

• No prepayment penalties – most lenders allow you to prepay your Private Educational Consolidation loan in full or in part without penalty at any time during the life of your loan.

Private Loan Consolidation Possible Disadvantages

• Interest rate is credit based and may be a variable rate that could increase after you close on your loan.

• Possible increase in total interest paid – since a Private Consolidation loan generally extends your repayment term, it may increase the amount of total interest paid on the loan.

• Possible loss of forbearance options.

• Possible loan guarantee fee added to the loan.

Listed below are some of the Private Educational Loan Consolidation providers that work with Pepperdine University Seaver students and alumni and the links to their websites.

Click here to connect to Citibank.

Click here to connect to Sallie Mae.

Click here to connect to Wells Fargo.

If you would like to email a question regarding loan consolidation, you may do so by clicking here.

It can be confusing to choose a student loan consolidation lender.  Some marketing messages can be vague, conflicting and occasionally unreliable.  The following is a list of recommended questions you should ask your consolidation loan lender so that you are aware of your loan terms:

1)  Which loans are eligible to consolidate?

2)  Is your consolidation loan issued under the Federal Government program, or is it a private loan?  (It is not recommended that you include Federal student loans in a Private Consolidation Loan.)

3)  What will my interest rate be?  Is it a fixed or variable rate?

4)  Are there any fees associated with the loan?  (There should be no fees associated with a Federal Consolidation Loan.)

5)  When will repayment begin?

6)  What if I am unable to start payments on my loan?

7)  What borrower benefits or discount programs do you offer, and what criteria do I have to meet to take advantage of them?

8)  How many years is my repayment for?

9)  What will my monthly payment and total repayment amounts be?

10)  How long will it take for my consolidation loan application to be processed?

11)  How long has your company participated in the Federal student loan program?  (It is important to choose a lender that has been in the business a while and understands the regulations and options for borrowers.)