Consolidation

Loan Consolidation – A Money Management Tool

Some students may wish to consolidate their federal student loans just prior to the end of their grace period.  There are many factors to consider when deciding whether or not to consolidate your loans.  Visit https://loanconsolidation.ed.gov for more information. Clarkson students and alumni may also discuss their loan consolidation options with the staff at SALTMONEY.org by calling 855-469-2724.

Why Consolidate?
If you have borrowed federal loans from more than one lender, consolidation can combine these loans together, enabling you to make one monthly payment.  Some students may have older FFEL loans that can be consolidated into the Direct Loan Program, to obtain the benefits offered by that program, such as Public Service Loan Forgiveness.

Varied Deferment Options
Borrowers with consolidation loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a consolidation loan may renew those deferment options.

Reduced Monthly Payments
A consolidation loan may ease the strain on a borrower's budget by lowering the borrower's overall monthly payment, or offer additional repayment plan choices. Keep in mind, however, that if you elect a longer repayment period, it will result in more total interest paid.  The minimum monthly payment on a consolidation loan may be lower than the combined payments charged on a borrower's Federal education loans, thus resulting in more total interest paid.

Graduate PLUS Loans
Each Graduate PLUS loan may be considered a separate loan unless consolidated. Based on your account balance, each loan could be subject to a minimum monthly payment of $50. This could be an issue with loans of approximately $4,000 or less. Consolidation would eliminate this situation, and the minimum monthly payment would be based on the total amount of the loans borrowed and submitted for consolidation.

Other Considerations

If you feel you may be eligible for Public Service Loan Forgiveness, the count of payments (120) restarts with a consolidated loan. Therefore, you would want to consolidate early, and then  be sure you are set up for an income based repayment plan.

If you provided a Grace Period End Date on your Consolidation application because you still have a loan(s) in a grace period and want to delay the new Consolidation Loan processing until the grace period end date, they will put your application on hold and start processing it within 45 days of the grace period end date.

If you consolidate more than $7,500, your repayment period will automatically be extended. For example, if you consolidate between $20,000 and $39,999, you will be given a 20 year repayment. Although you can still make larger than required payments, paying for a longer period will result in more total interest paid.

Although Perkins Loans are eligible for federal loan consolidation, some possible cancellation benefits would be lost if consolidated.

There are a few lenders who offer private loan consolidation. We cannot make specific recommendations. You should never consolidate federal loans with private loans, because of the loss of benefits.

If you choose a consolidation company other than the Department of Education, consider these questions:

• Will you be eligible for deferments and what are they?  Will you be eligible for forbearance?
• Who will you be making payments to?
• Will the company service their own loans?
• Will they sell your loans to someone else?
• Have you checked this company out at the Better Business Bureau website www.bbb.org?
• Will you have a grace period?
• How many years will your repayment period be?
• Does the consolidation company offer borrower benefits? What are they and what percentage of borrowers actually earn these benefits?
• Will your loan have a pre-payment penalty?