Consolidating Your Loans

The Department of Education offers borrowers the option of consolidating their federal loans through the William D. Ford Federal Direct Loan Program.

If you are making student loan payments to more than one lender, loan consolidation could simplify your loan repayment. By combining several student loans into one, you could reduce your monthly loan payment to just one lender. If you request a deferment or forbearance you will only need to request and complete one set of forms instead of additional forms for each of your lenders. Depending on the size of your debt, your repayment period may be extended, resulting in a more affordable monthly payment.

In general, most borrowers do not consolidate their loans until their grace period ends. This allows borrowers the full benefit of their initial grace period. Please remember you must continue to make payments to NCSU, or our billing service, until your consolidation loan is funded.

Advantages of Loan Consolidation:

  • Extended repayment period up to 20 years
  • Income salary adjustment program
  • Lower monthly payment amount
  • Convenient, single monthly payment
  • Consolidate most federal loans regardless of loan status
  • Fixed interest rate

If you do not qualify for the cancellation benefits offered by the Federal Perkins Loan Program, consolidating your loans could be for you.

Disadvantages of Loan Consolidation:

  • Extended repayment period adds to total interest expense.
  • Interest rate may be higher than rate for original loans. (Interest rate is the weighted average between the loans being consolidated.)
  • Federal Perkins Loan borrowers may lose eligibility to cancel their debt for full-time employment in certain fields of teaching, law enforcement, public service, etc.
  • A consolidated loan may not have as many deferment benefits and will not offer the cancellation benefits that a Federal Perkins Loan offers.
  • Peace Corps or service in the military benefits may not apply.
  • It is possible that the interest on the Federal Perkins Loan portion of your consolidation loan may not be deferred during the time of a deferment; check with Direct Loans before applying.
  • Private student loans cannot, in general be consolidated with federal student loans.

Eligibility for Loan Consolidation:

Before July 1, 2010, Stafford, PLUS, and Consolidation Loans were also made by private lenders under the Federal Family Education Loan (FFEL SM) Program. As a result of recent legislation, no further loans will be made under the FFEL Program beginning July 1, 2010. All new Stafford, PLUS, and Consolidation Loans will come directly from the U.S. Department of Education under the Direct Loan Program.

Married couples can consolidate their combined loans. This generally requires an agreement to be responsible for the loan regardless of individual debts or any change in marital status. Be sure to check with Direct Loans regarding deferment qualifications; generally both of you will have to meet the deferment requirement. Because of this it is probably best to consolidate your loans separately if you choose to consolidate.

Borrowers with delinquent or defaulted loans may also consolidate, provided they meet the repayment criteria set by the owner of their loan.

To Apply:

Direct Consolidation Loan Application

Warning
It is always good financial practice to never give information to consolidation companies who call you first. If the company seems to have an interesting deal, research it first, confirm any important selling points, then call THEM at their listed number.