Federal loan consolidation reduces the total monthly payment amount by combining outstanding student loans into one new loan. Consolidation creates a new promissary note. Consolidation of your loans may result in fewer deferment options, so check with your lender to see if consolidation is right for you. There is no grace period on a consolidation loan. You may consolidate at any time during the grace or repayment periods. However, you CANNOT consolidate your loans if you are currently enrolled in any classes. Repayment periods for consolidation loans my be up to 30 years, depending on the amount to be repaid.
Loans eligible for consolidation include: Federal Stafford subsidized and unsubsidized loans, Federal Supplemental Loans for Student (SLS), PLUS loans, Perkins loans, Federally Insured Student Loans (FISL), Health Professions Student Loans (HPSL), Health Education Assistance Loans (HEAL), and Nursing Student Loans (NSL). The interest rate for a consolidation loan is calculated by using the weighted average of the interest rates of all the loans consolidated (excluding the HEAL loans), rounded up to the nearest 1/8 of one percent. To estimate the interest rate on a consolidated loan, the borrower must know the remaining balance and interest rate on all of his/her student loans. We highly recommend that you not consolidate your private alternative loans with your federal loans, as doing so will eliminate the benefits associated with federal loans.
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