At this time, the only lender offering federal consolidation loans is the U.S. Department of Education's William D. Ford Direct Loan Program.
Direct Loans are now routinely outsourced for servicing. Although you will consolidate under the William D. Ford Direct Loan Program, your loan servicing company will have a different name. You will be able to choose your servicer during the consolidation process.
Note that FFEL loans, though federal in nature, are not owned by the Department of Education and are serviced by the lender. Perkins Loans are owned by the lending school and may be serviced by the school or by outside companies under contract.
IMPORTANT CONSIDERATIONS: Borrowers should be aware when consolidating that the borrower may also forfeit eligibility for certain deferment and cancellation provisions. A careful review of deferments and cancellations and the borrower's future status should be made before entering into a consolidation agreement.
Which loans are eligible for consolidation?
- Federal Perkins Loans
- Federal Stafford Loans (subsidized and unsubsidized)
- William D. Ford Direct Loans (subsidized and unsubsidized)
- William D. Ford Direct Consolidation Loans
- Federal Supplemental Loans for Students (SLS)
- Health Professions Student Loans (HPSL)
- Federal Nursing Loans (NSL)
- Parent Loan for Undergraduate Students (PLUS)
Why should I consolidate my loans?
Loan consolidation is a method for managing educational indebtedness by consolidating all eligible student loans into a single loan.
Benefits of consolidation include:
- Simplification of Finances: Most find it far easier to manage one student loan than a multitude.
- Better interest rates: Consolidation fixes the interest rate at the balanced, weighted, average interest rate of the loans being consolidated. The rates of many types of Federal Student loans vary annually, and by consolidating while rates are low, one assures that their rate will never increase.
- Lower monthly payments. Through consolidation, a borrower may reduce monthly payments by: 1. reducing the total number of loans and 2. extending the repayment life of the eligible loans.
- Cure of default. Even severely defaulted loans can be consolidated under the INCOME CONTIGENT REPAYMENT plan. This is often the first step in repairing finances, securing the release of transcripts, holds, and renewing eligibility for further financial aid. For help with this program, please contact our office.
- Renewal of Benefits. A consolidation loan carries eligibility for Student Deferment, Economic Hardship Deferment, Unemployment Hardship Deferment, Internship/Residency Deferment (if at least one existing loan has this benefit) and Forbearance. As it does not take into account benefits which have been used up, lost due to default, or not available on some but not all of your loans, consolidation is a great way to regain these useful benefits.
How do I consolidate my loans?
- Get a FSA ID. The Federal Student Aid (FSA) ID replaces the FAFSA PIN. If you do not already have a FSA ID, please obtain a FSA ID here. If you still know your FAFSA PIN, you can link the PIN to the new FSA ID and you will have immediate access to all sites associated with the FSA ID. If you do not link a PIN to the FSA ID, there will be a 3-day wait while FSA is authenticating your information.
- Find ALL of your loans. Use the Student Loan Locator and NSLDS links above to find your student loans. The Loan Trace number and credit reports can also be useful. If you have Loans borrowed from Marquette, call our office. (Note: Health Professions and Nursing Loans are not reported to NSLDS. The Student Loan Locator may not report loans which are not Federal or are not in repayment. Your FSA ID is necessary to access NSLDS).
- Contact your lenders and obtain the following information:
- Lender name, address, and phone number.
- Account number. Be aware that you may have more than one account number!
- Loan type. If you have multiple accounts, they may have multiple types!
- Account balance. The consolidation lender will verify payoff balances.
- Interest rate. If you have multiple loans, the rates per loan may vary!
- Do the math. Most lenders have an Online Calculator which allows you to input loan types, balances and interest rates, to generate estimates of your actual repayment terms on a consolidated loan. Use this for financial planning. If your lender doesn’t have an easily-accessible online calculator, use the Department of Education’s Online Consolidation Calculator.
- Apply for the consolidation via www.studentloans.gov. You are encouraged to apply online. Paper applications are also available. When applying, have available:
- Your FSA ID
- Your loan information (outlined above)
- The name, address, and phone number of two references.
- Print out the final promissory note. Keep this for your records, as it is legally binding. Once you have electronically signed the Final Promissory Note, the system will tell you when you are finished.
- Follow Up. It is wisest to contact all your lenders after a consolidation to assure that all loans to be included were indeed paid in full. Securely file any Paid In Full notices received, as these are the positive proof that you have satisfied these Federal Debts.