What is a Consolidation Loan?

A consolidation loan is a new loan that pays off your current federal education loan balances.  With a consolidation loan you will only have one lender and one monthly payment.  Married couples are allowed to consolidate their federal loans together into one new consolidation loan. To be eligible for a consolidation loan you must have at least 1 outstanding Federal Family Educational or Federal Direct Student Loan.

Advantages

  • Consolidation loans may have a longer payout period that your current loans, thus your monthly payments may be less.
  • By consolidating all your federal educational loans together you only have one lender to work with
  • Consolidation loan provisions have several different repayment plans such as income-sensitive, graduated payments or standard fixed payment amounts.

Disadvantage

  • Consolidation loans may have a higher interest rate than your current federal education loans
  • Consolidation loans do not have cancellation for service provisions
  • Consolidation loans may not have all the deferments benefits that your current loans have and your loan may accrue interest while in a deferment.
  • If you consolidate with your spouse, you both must be eligible for deferment at the same time for your loan to be put into deferment.
  • If you extend the payout time of your educational debt, you will pay more interest over the life of the loan

Eligible Loans for Consolidation

  • Federal Perkins Loan
  • Federal Family Educational Loans (Stafford, PLUS, SLS and Consolidation)
  • Federal Direct Loans (Stafford, PLUS and Consolidation)
  • Health Professional Student Loans
  • Nursing Student Loans
  • Health Education Assistance Loans (HEAL)

Consolidation Process

  • Choose an eligible consolidation lender
  • Contact the lender for the initial application
  • Include all loans that you wish to consolidate on the application
  • Contact each school, lender or Loan Servicer where you have an outstanding oan to inform them that you have applied for a consolidation loan
  • The consolidating lender will send a loan verification form to each of the holders you listed on your application
  • Each holder will complete and return the loan verification form to the consolidating lender
  • The consolidating lender will complete your loan process and send out a proceed check to each of your holding lenders to payoff your prior federal loan(s). 

For some additional information click here (UNISA Loan Consolidation Info)