[ financial aid home ]

[ loan consolidation ]   [ loan forgiveness ]

Loan Consolidation

• Where Are My Student Loans?
• What Is Loan Consolidation?
• How Does It Work?
• Eligibility
• Consolidation Interest Rate
• Questions To Ask Yourself
• Questions To Ask Your Servicer
• Putting It All Together
• Conclusion

What Is Loan Consolidation?

One of the repayment options available under the terms and conditions of your Federal Stafford Loans.

A refinancing of your existing federal student debt: a single new loan to pay off the individual original federal loans (not private loans).

Consolidation terms and conditions are similar but not identical to the original Federal Stafford loan.

[ back to top ] 

How Does It Work?

Apply for a consolidation loan either with your current lender, or another lender. Only federal student loans are eligible to be consolidated. This includes:

• Federal & Direct Stafford Loans
• Federal Perkins Loan
• Federal & Direct PLUS Loans (where you are the borrower)
• Health Professional Student Loans

[ back to top ] 

Eligibility

You cannot be enrolled more than half-time at a post-secondary school or be in your grace period or in repayment for each loan to be consolidated.

Identify all your educational debt:
Who were the lender(s), guarantor(s), servicer(s), what type of loan and account numbers for each loan; some may require outstanding balances of each loan to be consolidated.

Your TOTAL education debt (this includes both the federal and any private educational loans) determines the number of years you will have to repay your consolidation loan.

[ back to top ] 

Consolidation Interest Rates

The Federal Consolidation Loan interest rate is equal to the weighted average of the various loans being consolidated, rounded up to the nearest one-eighth of one percent, with a maximum of 8.25%. The weighted average with any rounding becomes a FIXED interest rate over the life of the consolidation.

Depending on when you borrowed a Federal or Direct Stafford Loan different interest rates apply to each original variable rate Stafford Loan after July 1st annually.

PLUS and SLS Loans are variable, and formula and cap depended on when they were borrowed; Perkins Loans are FIXED 5%.

Really LOOK at what you give up in way of special deferments and cancellations applicable ONLY to Perkins Loans.

As a rule, we do not recommend consolidating Perkins Loans.

You won't be able to re-consolidate the old consolidation loan into a new fixed rate consolidation loan. The only exception would be if you had a variable rate consolidation loan; then you MIGHT be able to switch to a newer fixed consolidation rate - check with your lender/servicer.

[ back to top ] 

Questions To Ask Yourself

• What loans do I have?
• How soon do I plan to repay my loans?
• Do I need the lower payment only for the short term, or for the life of the repayment time allowed?
• Do I plan to pay off early?
• If I consolidate what do I gain, what do I lose?
• Would there be enough of a difference in the required monthly payment for my 10 year original terms versus under consolidation for however many years I qualify for?
• Is locking in a “lower” FIXED rate important?
• Do I take a chance that the original variable rates over the 10 years will stay low?
• What are my short, mid, and long term goals financially, personally, and professionally?
• Does consolidation in general fit in with them?
• If not, does the lower fixed rate provide enough justification to consolidate anyway?

[ back to top ] 

Questions To Ask Your Servicer

• How long will it take to complete the consolidation paperwork?
• What rate do I lock into the weighted average formula?
• If I apply in July/August can I request a start date in November?
• If I apply in early October, will it be based on the grace period rate or the repayment rate if it is not completed until Nov/Dec?
• Can I request an amortization schedule prior to “applying”?
• Can I amortize the loan for fewer years than you would normally be allowed?
• Can I take a 30 year and setup a 20 year payoff?
• If I take a shorter payout, can I switch back to the full time if cash problems develop?
• Based on when I apply, when is my first payment due?
• Can I pay via auto debit and how long will it take to setup and/or change?
• What repayment incentives are offered?
• Are there penalties?
• How do my deferment/forbearance options change from what I would have if I did not consolidate?

[ back to top ] 

Putting It All Together

Collect all your loan records:

• Pull together your loan records
• Check the NSLDS website for your federal student loan information
• Access your lenders/servicers websites
• Use the loan repayment calculators available on a number of lender websites

Review the answers from your lender/servicer queries (how responsive and timely they are can provide clues in deciding on a specific consolidator?).

What did you decide was important to you in consolidating? In choosing a consolidator?

[ back to top ] 

Conclusion

Consolidation may not be right for every one. Please carefully consider all of your options before making a decision!

Contact you current lender(s) or servicer(s) for specific information and with specific questions.

The Office of Financial Aid CANNOT decide for you, nor can it answer WHAT a given lender/servicer will actually do.

The loan exit materials sent to you in the spring contained lender/servicer contact information as well as websites for calculators, financial planning, etc.

If lost or misplaced, we can send out a duplicate set – email finaid@willamette.edu requesting either an undergraduate or graduate exit packet. Please include a current address!

The Office of Financial Aid is in its PEAK period in preparation for the start of the school year. We cannot handle one-on-one consolidation phone conversations and/or appointments. Please contact your lender for more specific information.

Good luck in your future endeavors. We wish you much success, joy, and happiness.

[ back to top ] 

Willamette University   -   Financial Aid Office
900 State Street, Salem, OR 97301   -   503-370-6273   -    Toll Free 1-877-744-3736   -   finaid@willamette.edu