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Consolidation

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Loan Consolidation – A Money Management Tool

The process has changed beginning January 2014. Most borrowers will apply from the www.studentloans.gov website.  (Borrowers in default will use the old website, www.loanconsolidation.ed.gov. This site will also be used for any applications in process prior to January 2, 2014).

Not all students will want to consolidate their federal loans. There are many factors to consider when deciding whether or not to consolidate your loans. Visit www.studentaid.ed.gov/repay-loans/consolidation for more information. Clarkson students and alumni may also discuss their loan consolidation options with the staff at www.saltmoney.org by calling (855) 469-2724.

New features include the following:

A National Student Loan Data System (NSLDS) lookup will be performed, and information about an applicant's federal education loans will populate within the application. The applicant will have the opportunity to add or remove loans from the information obtained from the NSLDS.

An applicant can consolidate a loan still in it's grace period and delay entering repayment until closer to the grace period end date by indicating this at the time of application.

Ann applicant will choose the federal loan servicer that he/she wants to complete the consolidation.

An applicant will select the repayment plan under which he or she wants to repay the Direct Consolidation Loan. When making this selection, an applicant who is interested in one of the "income driven" repayment plans will be able to complete the Electronic Income-based Repayment (IBR)/Pay as You Earn/Income-Contingent Repayment (ICR) Plan Request as part of the Direct Consolidation Loan process.

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

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 period. Although you can still make larger than required payments; paying for a longer period of time will result in more total interest paid.

It is critical that borrowers continue making payments, if required, to the holders or servicers of the loans with pending consolidations, until the consolidation servicer indicates that the underlying loans have been paid off.

Private (Alternative) Loan Consolidation

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 to consolidate your private loans, consider these questions:

  • Will you be eligible for deferments and what are they?  Are you eligible for student deferment while enrolled as a graduate student? 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 the benefits, and what percentage of borrowers actually earn these benefits?
  • Will your loan have a pre-payment penalty?
Revised January 2014
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