Financial Aid : IUPUI

image: IUPUI is a leading urban university campus where students earn degrees from Indiana University or Purdue University.

Student Loan Consolidation

What Is Consolidation?

Consolidation is an option to simplify the repayment process of multiple federal student loans into one consolidation loan with a single monthly payment. With a consolidation loan, your loan holder pays off your existing loans with the new consolidation loan.

A consolidation loan may also be available for private/alternative loans from the loan holder. Private/Alternative loans cannot be included in a federal consolidation loan. For more information, contact your private/alternative loan holder.

What Federal Student Loans Can I Consolidate?

Consolidation Loans are available through the FFEL (Federal Family Education Loan) program and the Federal Direct Loan program.

Federal Stafford Subsidized & Unsubsidized Loans (both FFEL & Direct Lending)
Federal PLUS Loans (students cannot consolidate parent PLUS loans not in their name)
Federal Graduate PLUS Loans
Federal Perkins Loans
Federal Nursing Loans (NSL)
Federal Supplemental Loans for Students (SLS)
Health Education Assistance Loans (HEAL)
Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)

You are not required to consolidate all of your federal student loans (Stafford, PLUS, Perkins, Health Profession Loans, Loan for Disadvantaged Students and older SFA loans).

What Are the Advantages and Disadvantages of Consolidation?

For any consolidation loan (federal or private), there are advantages & disadvantages.

Advantages:

One payment - all your loans are combined into one loan
Lower monthly payments - by extending the time you have to repay the consolidation loan.
Fixed interest rate for a Federal Consolidation Loan (does not apply to alternative/ private consolidation loans).

Disadvantages:

Losing borrower benefits - consolidation loans do not offer the same benefits that you would receive on your original loans. For example, you might lose some discharge (cancellation) benefits if you consolidate a Federal Perkins Loan. Other borrower benefits that may be lost include interest rate discounts or principal rebates that can significantly reduce the cost of repaying your loans.
Greater total amount repaid - by extending the time you have to repay the loan, you will pay more interest on the loan. In fact, consolidation can double total interest expense.
Earlier repayment start date if you consolidate during a “grace period” for a Federal Perkins Loan, Federal Stafford Loan or Direct Stafford Loan.

If you are experiencing difficulty making your current federal student loan payments, you have repayment plan alternatives besides consolidation. Contact your federal student lender to consider options to switch to an extended, graduated or income sensitive repayment plan.

It is important that you ask the right questions and know all of the terms, benefits and options before consolidating. Once you consolidate, the consolidation loan has paid off the original loans and it cannot be cancelled.

What Is the Interest Rate on a Federal Consolidation Loan?

FFEL and Direct Consolidation Loans have the same fixed interest rate set by a formula established by law. The fixed interest rate is the weighted average rates charged on the loans being consolidated, rounded up by one-eighth of one percent. The maximum interest rate for a federal consolidation loan is 8.25%.

If you have a Stafford loan made on or after July 1, 1995, you can reduce your consolidation rate by up to half a percentage point or more if you consolidate before the end of your grace period.

What Is the Repayment Period for a Federal Consolidation Loan?

The repayment period ranges from 10 to 30 years, depending on the amount of your debt and the repayment option you select.

When Can I Consolidate?

You can consolidate your federal loans in a grace, repayment, deferment, or forbearance status.

**You can no longer consolidate your loan(s) while you are enrolled in school.

How Do I Consolidate?

After researching all of your options and choosing the lender with whom you wish to consolidate, you should contact the lender directly to begin the consolidation process.

FFEL Consolidation Loans - contact the lender or servicer of your current loans.
Direct Consolidation Loans - contact the Direct Loan Origination Center’s Consolidation Department.
Private Consolidation Loans - contact the lender or servicer of your current loans.

If you are uncertain regarding your federal student loan holder, you can review your federal student loan history at the National Student Loan Data System (NSLDS).

Many lenders offer consolidation loans, and you should research and compare the benefits and terms before consolidating with any lender.

Private/Alternative Loan Consolidation

While you cannot consolidate your private/alternative loans with your federal loans, some lenders provide a private loan consolidation.

With many of these lenders, you must meet certain qualifications to consolidate your private loans. These qualifications are based on credit score and the amount borrowed. There may be other criteria as well, so you need to check with the private consolidation lender of your choice to ensure that you meet their specific qualifications.

As with the federal consolidation loans, it is important that you research and compare lenders prior to making your final lender decision to ensure you are getting the best terms and benefits available. Once you consolidate your private loans, you cannot “un-consolidate” them for a better consolidation package.