FAQ’s for Consolidation Loans
Following are some common questions regarding Consolidation Loans.
TuitionChoice has provided general and helpful answers to better inform you
to what a Consolidation Loan is and how it works. For official definitions
and regulations please check with your lender of choice and with the
Department of Education at
www.studentaid.ed.gov.
- What is a consolidation loan?
A consolidation loan is a new loan that students take out to combine
two or more loans into one new loan.
- What loans can be consolidated?
Traditionally, only federal loans, such as Stafford, Direct, and Perkins loans could
be consolidated into a new loan. More and more though, there are lenders who
will consolidate private loans with federal loans.
- Will any lender consolidate my loans?
No. Not all lenders offer consolidation, and if they do, not all lenders will
consolidate all types of loans. Please check with your lender and your school
for guidance.
- Will my consolidation loan have a fixed of variable interest rate?
Generally, students consolidated their loans so they could get away from a
variable rate loan and get into a fixed rate loan. Be sure to ask ahead of time
if your consolidation loan will have a fixed or variable rate.
- Do I have to make payments on my consolidation loan if I am still in school?
Check with your consolidating lender to be sure but, generally, payments for
consolidation loans are deferred while the student attends at least half time in
a degree seeking program.
- How long will I need to make payments on my consolidation loan?
Your repayment term for your consolidation loan can vary depending on the
lender who does the loan and the amount of the loan. The larger the amount of
the loan, it might be possible to have a longer repayment term. Check with
your consolidating lender for details.
- Can I consolidate my undergraduate loans while still attending as an undergraduate?
As of July 1st, 2006, in-school deferments of federal loans are no-longer allowed.
Students must be either in repayment of their loans or they must be in their
grace period.
- Is it better to consolidate my federal loans into one loan or should I keep them separate?
That depends on the interest rate that you currently are paying compared to the
consolidation rate and it also depends on how long the repayment terms are for
old and new loans which determines the total amount of money paid back through
the life of the loan. Your school’s aid professional may be able to help further
with this as they can look at the specific numbers or any certified accountant.
- Will my lender automatically offer to consolidate my loans?
No. Some lenders don’t offer consolidation and some will do it only if you
request it. If you are interested in consolidating you should check with your
or loan servicer to learn what your options are.
- Can private loans be consolidated with federal loans?
In most cases, no. There are some lenders who are beginning to offer
consolidation of both federal and private loans, usually if you have a
private loan with them, but you would need to check with the lender
specifically to see if they offer that type of loan.
- Can my parents’ PLUS loan be consolidated with my other loans?
No. Since your parents’ PLUS loan is legally in their name and not in your name
it can not be combined with any loans that are in your name.
- Should I consolidate with any random company that offers consolidation through the mail even if I have never heard of them?
You should check with your school’s Financial Aid Office if you have any
questions regarding a solicitation offer to consolidate your loans. Also,
make sure that the lender is in good standing with the Better Business Bureau.
- Does my original lender have to have first rights to my consolidation business or can I ask any lender to consolidate?
Before July 1st, 2006, yes, your original lender had to have first rights to
consolidating your federal loans. That no longer is the case and you may seek
a consolidation loan through any eligible FFELP lender that you choose.
- Should I consolidate my loans even if the rate increases?
In most cases, no, but check with a certified accountant or your school’s
Financial Aid Office first. Depending on the repayment period of the loan
a larger interest rate paid off sooner might be the best option.
- How many times can I consolidate my loans?
Federal loans can only be consolidated once. Private loans have no laws
regulating this but most lenders will only do this one time as well.
- Is there a limit to how much I can consolidate?
No, for most lenders there will be no limits as to the amount of loan that you
can consolidate.
- Are there any fees to consolidate my loans?
No, for most lenders there will be no fees to do a consolidation loan and there
are usually no prepayment fees if you pay back your loan early.