Benefits of Federal Loan Consolidation

A Federal Consolidation Loan allows you to combine one or more of your federal education loans into a new loan that offers you several advantages.

Lower Interest Rate For In-School and In-Grace Consolidation
Borrowers who have a Federal Loan in an in-school or grace period at the time we receive their consolidation application, may benefit from a lower fixed interest rate on the new Federal Consolidation Loan. The difference between a borrower's interest rate during their in-school and/or grace period and during their repayment period can be as high as 0.6%.

Lower Interest Rate for Auto-Debit and On-Time Payment
Receive 0.25% off when you enroll in automatic checking account withdrawal. Add another 1.0% off after

One Lender and One Monthly Payment
With only one lender and one monthly bill, you will find it is easier to manage your debt. You will have only one lender, the Student Loan Network, for all loans included in your Federal Consolidation Loan.

Flexible Repayment Options
You can choose from different plans to repay your Federal Consolidation Loan. These plans are flexible to meet the different needs of borrowers. With a Federal Consolidation Loan, you can switch repayment plans at anytime.

Grace Period
If you consolidate while in-school, you may receive a 6-month grace period before repayment begins.

No Fees
Consolidation is free.

Varied Deferment Options
Federal Consolidation Loans offer several deferment options. If you have exhausted the deferment options on your current Federal education loans, a Federal Consolidation Loan could renew those deferment options. In addition, you may be eligible for additional deferment options if you have an outstanding balance on an FFEL made before July 1, 1993, when you obtain your first Federal Loan.

Reduced Monthly Payments
A Federal Consolidation Loan may lower your monthly payment. The minimum monthly payment on a Federal Consolidation Loan may be lower than the payments on your federal education loans.

Retention of Subsidy Benefits
You will keep any subsidies on your old loans.

Is Consolidation Right for You?

Here are some factors you should consider when deciding if consolidation is right for you.

What are the interest rates on your loans? If a Federal Consolidation Loan offers you a lower rate than your current loans, you may want to consolidate. Currently, the interest rate for a Federal Consolidation Loan is based on the weighted average interest rate on the loans being consolidated, rounded to the next nearest higher one-eighth of one percent. This rate is fixed for the life of the loan and cannot exceed 8.25 percent.

Are your monthly payments manageable? If you have trouble meeting your monthly payments, have exhausted your deferment and forbearance options, and/or want to avoid default, consolidation may help you.

How much are you willing to pay over the long term? Like a home mortgage or a car loan, extending the years of repayment increases the total amount you have to repay.

How many payments do you have left on your loans? If you are close to paying off your student loans, it may not be worth the effort to consolidate or extend your payments.

What consolidation loan benefits do your current lenders offer? Check with the loan holders currently servicing your loans to see if they can offer terms and repayment plans that meet your needs better than a Federal Consolidation Loan.

Source: US Department of Education

What is the interest rate?

The rate will be a fixed rate equal to a weighted average of the interest rates on your existing loans rounded up to the nearest one-eighth of one percent.

Currently, rates are set to the following starting points:
Stafford Loans in grace: 4.7%
Stafford Loans in repayment: 5.3%
Stafford Loans in repayment prior to 7/1/98: 6.1%
PLUS Loans: 6.1%
Perkins Loans: 5%
HEAL Loans: 4.125%
Previous consolidations: existing consolidation rate

These rates are starting points and do not represent the final, lower rates you would receive with any applicable discounts.

Consolidations done during the loan "grace" period will be based on a weighted average of the in-school interest rates, which are generally lower. Use our Loan Calculator to help you figure out your new rate and monthly payment.

Please note that we cannot guarantee any interest rate due to the time it takes to process an application. We can only provide rough estimates; you should not rely on these estimates for financial planning! Why? Because consolidation takes between 30 - 60 days, and in that time period, you may be making payments, or your loan status may change. Because your interest rate is determined not only on the type of loan you have, but also on how much you owe, we can make no guarantee except to say that your interest rates will never exceed federally specified, published rates.

How do the discounts work?

Discounts remove time off your loan. Your monthly payment does not change, but the overall time you pay does. For loans over $20,000, if you take advantage of both discounts, on average you will save:
Almost 3 years on a 20 year loan
Almost 4 years on a 25 year loan
Almost 5 years on a 30 year loan

The 0.25% automatic debit discount is permanent as long as you continue to use the program.

The 1% discount for the first 36 consecutive on time payments is effective after 36 months.

What about private loan consolidation?

It's not a bad idea to consolidate your private student loans. What is a bad idea is combining federal and private student loans, which results in a consolidated private loan. This is bad for many reasons:
You cannot defer payments on a private loan consolidation if you want to go back to school. You can with federal loan consolidation.
You cannot forbear payments in case of economic hardship on a private loan consolidation.
You cannot claim interest as a tax deduction on a private loan consolidation.
You cannot apply for forgiveness on a private loan consolidation. Certain types of work, such as federal volunteer programs, teaching in economic development zones, and military service, among others, can qualify you to have part or all of your federal loans dismissed by the government.
If you should pass away, private loans are passed to your next of kin. Federal loans are forgiven.
Private loan consolidation very often has variable rates, which means you cannot lock in today's current historic low rates. Those rates may be tied to volatile indexes like the Prime Rate, which can jump as high as 13%.

Consolidating your federal student loans first is very important, because in doing so, you reduce the number of open lines of credit (loans) you have. This boosts your credit score, enabling you to obtain better terms for private loan consolidation.

What about credit card consolidation, car loans, etc.?

Unfortunately, you cannot combine non-federal loans of any kind with federal student loans. Why? Because they are different types of loans. Federal student loans are backed by the US Government; if a student doesn't pay their loans, the government pays the lender, and then obtains payment from the student. The lending institutions (typically banks) know that they will always get their money back, which is why they can offer student loans at such low rates compared to other kinds of loans.

Private loans, such as credit cards, car loans, mortgages, etc. are backed by an individual's creditworthiness and collateral. Lending institutions take higher risks in loaning money privately than through the government. The government and the banks will not permit low-risk loans to be combined with high risk loans, and so you cannot consolidate other forms of debt with your federal student loans.

However, consolidate student loans to improve your credit rating, and you may be able to qualify for better interest rates on your private loans when you refinance them.

I consolidated in the past, can I do it again?

It depends. Consolidation is the combination of many loans into one. If you have consolidated in the past with someone other than the US Department of Education, you can't do it again unless:
You have new loans that were not included in the original consolidation.
Or, you have multiple consolidations from different lenders.

You can, however, consolidate with the Department of Education and then reconsolidate with us, even if you've consolidated before with another company.

How is the consolidation loan repaid?

The first payment is due no more than 60 days from the date the Consolidation loan is disbursed. Repayment schedule choices include:
Standard payments (fixed monthly payments over a fixed time)
Graduated payments (payments which gradually increase over the years)
Income-Sensitive payments (variable payment amounts based upon annual income) and
Extended payments (more than $30,000 over a 25 year period or more than $60,000 over a 30 year period).

Are there any early payment/repayment fees or penalties?

No, there are no early repayment penalties for a student loan consolidation. The government wants its money back. To make extra payments, consolidate now, and then when your payment schedule begins, simply specify "Extra payment to principal" on your early payments.

Did you know that early repayments are interest-free? It's true! Every dollar beyond your required monthly payment is paid towards the principal - it's like an interest-free payment!

Can I defer or forbear?

Yes! One of the greatest benefits of federal student loan consolidation is that you retain all your federal borrowing privileges, such as:
Deferment of your consolidation payments when you return to school
Forbearance of your consolidation for up to 36 months without losing borrower benefits
Forgiveness of your entire loan if you pass away

How do you defer? Once you consolidate, you will receive paperwork for your payment schedule. At that time, you can request a deferment or forbearance form.

To get forms, click here!

Did you know that your deferment and forbearance clock resets when you consolidate? It's true! If you've already used part of a deferment or forbearance on your existing federal student loans, when you consolidate, it's essentially a new loan, so your deferment and forbearance clocks reset, giving you a clean start!

Why Consolidate?

The very best time to consolidate your student loans is immediately after graduating, before your grace period ends. Doing so allows you to lock in the lowest possible interest rate on your loans.

Consolidating is a great option whenever you want to increase your monthly cash flow - by consolidating, you extend your repayment term and get additional discounts on your existing rates, which reduces the monthly payment you make.

Consolidating now is a great time, because interest rates are projected to continue rising, so consolidate your student loans right now!

Repayment Guidelines

Depending on the total amount of your consolidation loan, the government has set the following repayment periods:
Loan Balance Repayment Period
$10,000 - $19,999.99 15 years
$20,000 - $39,999.99 20 years
$40,000 - $59,999.99 25 years
$60,000 and above 30 years