#school 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. Consolidation loans are available for most federal loans, including FFELP (Federal Family Education Loan Program) and Direct Loan Stafford and PLUS loans.
Factors to consider
Factors to consider when deciding if you should consolidate:
- If you have trouble meeting your monthly payments, have exhausted your deferment or forbearance options and/or want to avoid default, a consolidation loan might help you.
- If you send payments to more than one lender each month and would like the convenience of a single monthly payment, you should explore consolidating your loans.
- If you have variable interest rates on your federal education loans, you may want to consolidate.
- The consolidation loan extends the years of repayment and thus, the total amount you have to repay.
- If you are close to paying off your student loans, it may not be worth the effort to consolidate.
FinAid’s Loan Consolidation Calculator can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan.
Direct Consolidation Loans
Due to the Health Care and Education Reconciliation Act of 2010 (HR 4872), FFEL Program lenders are no longer offering consolidations. You can consolidate your loans using the U.S. Department of Education s Federal Direct Loan Consolidation program .