Loan Consolidation 101 The ‘Who, What, Why, When & How’ of Student Loan Consolidation

What is Loan Consolidation? A way for borrowers to merge all of their Federal Student Loans into one new loan. Eligible loans include Federal Stafford and Direct Loans (both Subsidized and Unsubsidized), PLUS Loans, Federal Perkins Loans, Federal and Direct Consolidations (as long as you have a ‘new’ student loan that was not included originally), and all Federal FFELP loans. Loans made by a private lender and are not guaranteed by the federal government are not eligible.

Why Loan Consolidation? Manageable monthly payments; One check to one provider each month; Various repayment options; 10 to 30 year repayment terms depending on debt; No co-signer, collateral or employment necessary to qualify; Fixed interest rate for life of the loan based on the weighted average rate (rounded to the next 1/8%) not to exceed 8.25%; No pre-payment penalty; Saves today when you need it most.

Who Can Consolidate? Borrowers that are not in default (unless satisfactory repayment arrangements are made with current loan holders OR they agree to repay under the Income Contingent Repayment Plan); Borrowers who are not in school more than half-time; Borrowers who have at least one Direct Loan or FFEL that is in grace, repayment or deferment. Spousal consolidation no longer exists. However, you can apply for a service called "joint billing" that will enable you to pay you and your spouse's federal loan bills in one payment each month.

Repayment Options Standard repayment (fixed monthly payment for 10 yr. max term) Extended repayment Graduated repayment Income Sensitive Repayment (ISR): payments are % of gross monthly income for 10 year term Income Based Repayment (IBR) Income Contingent Repayment (ICR) Pay As You Earn Plan

“Popular Plan” Comparison Income Contingent Repayment (ICR) and Income Based Repayment (IBR): Similarities of both plans include: Affordable monthly payments based on income and family size; Any remaining balance is forgiven after 25 years, however is treated as taxable income that year; Monthly payments may be adjusted annually based on changes in income. Differences include: IBR is available under both FFEL and Direct Loans; ICR is only available under Direct Loans; IBR payment is based only on income and family size; ICR is based on income, family size and Direct Loan debt; Government pays remaining unpaid accrued interest on Sub loans for up to 3 years under IBR but not under ICR.

Something New As of December 21, 2012, the Pay As You Earn Plan is available to eligible borrowers. Must have a “partial financial hardship” meaning the monthly payment you would be required to pay under a 10 year Standard Repayment Plan is higher than the required monthly Pay As You Earn amount; Must be a new borrower as of October 1, 2007, and must have received a disbursement of a Direct Loan on or after October 1, 2011; Payment may change based on income and family size; Only Direct Sub or Unsub, PLUS, or Direct Consolidation Loans are eligible, not FFEL, private, or Parent PLUS; Usually lower monthly payment over any other plan but may pay more interest; Loan amount forgiven after 20 years.

Public Service Loan Forgiveness (PSLF) Created for individuals working full-time in public service jobs, however, borrowers will not qualify unless …”they are involved in activities that are unrelated to religious instruction, worship, or proselytizing”. Under this program, you may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments at the 10 year repayment rate while employed full time by certain public service employers. Although loan forgiveness under this program is available only for loans made and repaid under the Direct Loan Program, loans made under other federal student loan programs may qualify for forgiveness if they are consolidated into a Direct Consolidation Loan.

When To Consolidate? You can apply for consolidation immediately after graduating, but be sure to designate the precise date that your grace period ends on your application so as not to lose any of your 6 month grace period. (November 15, 2013) You may still take advantage of the Loan Consolidation program even after you are in repayment. The process takes approximately days.

How To Consolidate Apply online at Click on Borrower Services to find out what you need before you begin as well as the application. Apply over the phone using the Express Phone Application if you have all Direct Loans at Download a paper copy including complete contents of the application package also at

Important links find all the information you need about the Income Based Repayment Plan as well as the new Pay As You Earn Plan. Don‘t miss the very helpful FAQ’s on this page that also compare IBR & ICR! click on the Repay Your Loans tab to find repayment calculators and plan comparison. Find out how much you owe and who your servicers are. Also be sure to complete your required Exit Counseling here! another helpful plan comparison site with calculators.