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Consolidating Federal Student Loans

Students are able to consolidate their federal student loans, including Direct, Stafford, and Perkins loans, into a Direct Consolidation Loan. The consolidation is processed by the Federal Direct Loan Program which is the servicing agency for Federal Direct student loans.

The interest rate for your Direct Consolidation loan will be a fixed rate and the rate is determined by the weighted average of the interest rates on the loan(s) being consolidated, rounded to the nearest higher one-eighth of one percent.

Most of the deferment provisions of Federal Direct loans are retained for Federal Direct Consolidation loans including:
* In-school deferments;
* Graduate fellowship
* Rehabilitation training;
* Economic hardship; and
* Unemployment.

There is no fee involved with loan consolidation!

What are the interest rates for a Federal Student Consolidation Loan?
By consolidating your education loan(s) your interest rate will be a fixed rate and is determined by the weighted average of the interest rates on the loan(s) being consolidated, rounded to the nearest higher one-eighth of one percent.

For loans first disbursed on or after July 1, 1998, and through June 30, 2006, the consolidation loan fixed interest rates for Direct Student Loans and Stafford Loans, effective July 1, 2006 through June 30, 2007, are as follows:
6.625% - during grace, and deferment periods;
7.250% - during repayment period.
(Note that borrowers are no longer able to consolidate their loans while in-school.)

If you have federal loans with more than one interest rate, for example a Direct Loan and a Perkins Loan, use the on-line interactive calculator at www.loanconsolidation.ed.gov (click on Borrower services) to determine the weighted average interest rate and to see what your monthly payments might be under the four repayment plans.

Student borrowers may reduce their Direct Consolidation loan interest rate by an extra 0.25 percent by electing to pay their monthly payments through Electronic Debit Accounts (EDA). This means that you authorize the payments to be made out of your checking account. Using EDA would ensure "on time" payments and should be considered by every borrower entering loan repayment. If you are interested in Electronic Debit Accounts, please contact Borrower Services at 1-800-848-0979 or visit their web site at www.dlservicer.ed.gov .

When should one apply for a Direct Consolidation Loan?
You may apply for a Direct Consolidation loan at anytime, however, keep the following in mind:

1. If you currently have a variable interest rate loan, be aware of the annual changes to the interest rates. These occur on July 1. If the rate is expected to be higher on July 1, plan to apply for a consolidation loan prior to June 30. If the rate is expected to be lower on July 1, plan to apply after the rate changes. We are notified of the rate changes by June 1 and we post these changes on this web site.

2. If you have a six month grace period on your loan(s), it may make sense to hold off on consolidating until 45 days prior to the end of the grace period. The grace period rate is lower than the repayment period rate. Consolidation loans do not have grace periods so if you apply too early during your current loan's grace period, you run the risk of having your first payment be due before your grace period ends. By waiting until the latter part of your grace period you will receive most of your grace period and still receive the lower rate.

How to apply for a Direct Consolidation Loan?
If you have any questions about applying for a Direct Consolidation loan, call the Loan Consolidation Center at 800-557-7392. The Center is open Monday through Friday, 8AM to 8PM (EST). The staff at the Center are able to answer your questions about the loan consolidation process or if you need further assistance.

If you only have William D. Ford Federal Direct loans, you may APPLY OVER THE PHONE. Call the Loan Consolidation Center at 800-557-7392. (Note that if you entered Hampshire beginning in Fall 1995 or after, your federal student loans have been William D. Ford Federal Direct loans.) Choose the option to speak with a customer service representative (option #4). State that you only have Direct loans and that you want to apply over the phone. You will be asked some basic personal information. A promissory note will then be sent to you to sign. Sign and return the promissory note as soon as possible.

APPLY ON-LINE at www.loanconsolidation.ed.gov (Click on Borrower Services). If you have a federal PIN number you are able to sign the promissory note electronically. This is the fastest way to process your Direct Consolidation loan. If you do not have a PIN number, you may complete the application on-line and then print out the promissory note or request to have a promissory note sent to you to sign and return. You may also request a PIN number at this same site.

APPLY USING A PAPER APPLICATON FORM. You may call the Loan Consolidation Center at 800-557-7392, to request a paper application (option #1). You may also print a copy at www.loanconsolidation.ed.gov..

Note that if you have Stafford and/or Perkins loans to consolidate with your Direct loans, you need to either apply on-line or by paper.

Information you will be asked to provide for a Direct Consolidation Loan application
If you plan to apply via the on-line or paper application for a Direct Consolidation loan, you will need to provide loan account information including:

1. Loan holder: if your loan is a William D. Ford Direct Loan, your loan holder is the Direct Loan Program, PO Box 4609, Utica, NY 13504; phone: (800) 848-0979; if you have other federal loans, refer to the correspondence you receive from each lender.

2. Loan type: on the on-line and paper versions, use Code ‘D’ for subsidized Direct loans; use Code ‘L’ for unsubsidized Direct loans; for other types of loans, refer to the charts provided on the web site or with the paper application.

3. Account number: your social security number is your loan account number.

4. Current balance: use the original loan amounts for subsidized loans; do the same for unsubsidized but if you have not been paying the interest, call Borrower Services (800-848-0979) to get an accurate balance. You may simply list the total of subsidized and the total of unsubsidized loans instead of listing numerous separate loans. For example, if you have five separate loans totaling $16,000 ($8000 in subsidized loans and $8000 in unsub loans), you may list just two loans (sub & unsub of $8000 each) instead of the five. If you need to determine the types and amounts of your loans call Borrower Services at 1-800-848-0979.

5. To be consolidated: List all loans and indicate which are to be consolidated. Including all loans, even if not to be consolidated, will help in determining loan terms for extended and graduated repayment plans.

Call the Loan Consolidation Center at 1-800-557-7392 with questions regarding loan consolidation.

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