Financial Aid
Loan Consolidation Information
A process of combining individual loans into one new loan to simplify and possibly lower the monthly payment and/or extend the repayment period.
Loan consolidation is another way for borrowers to handle large educational debts or combine multiple loans with multiple lenders to a single lender. A loan consolidation is a new loan that actually pays off the borrower's qualifying outstanding student loans, leaving the borrower with one loan and payment. Consolidation also offers an extended repayment period that can range from 10 to 30 years depending on the total amount of the educational loans.
However, the borrower needs to be aware of the additional interest costs associated with longer repayment periods. In some cases, the interest expenses may be double or triple the amount you would pay under the standard repayment plan.
The following loans can qualify for consolidation:
FFELP loans (Stafford, PLUS, SLS, and Consolidation loans)
FDLP Direct loans (Stafford, PLUS, and Consolidation loans)
FISL loans
Perkins loans
Health Professions Student Loans (HPSL) including loans for Disadvantaged Students (LDS)
Nursing Student Loans (NSL)
Heath Education Assistance Loans (HEAL)
Repayment
A Federal Consolidation loan enters repayment on the date the loan is disbursed. The lender/servicer must establish a first payment due date that is no more than 60 days after the date the Consolidation loan is fully disbursed.
Interest Rate
The interest rate on a Federal Consolidation is the weighted-average rate of the loans being consolidated rounded up to the nearest 1/8th of a percent but cannot exceed 8.25 percent. This rate is fixed for the life of the consolidation loan.
Borrower Eligibility
For FFELP Consolidation - at the time of application the student must be in a grace period or repayment status on all loans being consolidated. If a student has delinquent or defaulted loans they should contact the lender or servicer doing the consolidation for eligibility status.
For FDLP Consolidation - the student can be in a grace period, repayment status or can do an In-School Consolidation providing they meet the requirements specified. For further information on In-School Direct Loan Consolidation, contact:
Direct Loan Consolidation Center at 1-800-557-7392 or www.loanconsolidation.ed.gov/
Consolidation Tips
Plan Ahead. The consolidation process usually takes 60-90 days for completion.
Decide Whom to Consolidate With. Normally the student should consolidate with one of the lender(s) who already holds their loans unless the lender does not offer the consolidation program, the desired repayment plan option, or may not offer the default consolidation option. Once the decision is made who to consolidate with, then you must contact that lender to request a consolidation application.
Know Your Loan Information. Prior to completing the consolidation application, know whom your lender(s) or servicers are, know the amount of outstanding balance(s), the loan types, and the interest rate for each loan.
Keep up on Your Monthly Payments. If you will enter repayment on your loans prior to the completion of the consolidation process, you must still pay each scheduled payment. If you are not able to make your payments, you should contact your lender or servicer to request a deferment or forbearance until the consolidation is completed. For additional information on deferment and/or forbearance visit "What If I Have Difficulty Making Payments"
Please note: If you are a student requesting consolidation, you cannot include a Parent PLUS Loan in your consolidation. If you are a parent requesting consolidation, you cannot include your child's student loans in your consolidation loan.
Spousal Consolidation
Married borrowers are eligible for joint consolidation. Contact your lender/servicer or school for information. There are some lender/servicers who will not process requests for Spousal Consolidation.
Married borrowers should be counseled to weigh carefully their decision to consolidate jointly. Please be advised that:
To receive a deferment with a Spousal Consolidation, both spouses have to qualify (both individuals must simultaneously meet the requirements for receiving the same or different deferments).
If one spouse dies or becomes permanently disabled, the other spouse is still responsible for repayment of the entire loan. On the other hand when a single borrower dies or becomes permanently disabled, the consolidation loan is discharged.
In the case of divorce, both parties are accountable for the entire consolidation loan until it is paid in full. Thus, each spouse may want to consolidate separately to minimize risk.
Default Consolidation
Borrowers who want to consolidate a defaulted loan(s) must meet additional requirements for eligibility. The following requirements are divided for borrowers with Direct Loans and borrowers with Federal Family Education Loans (FFELs).
For Direct Loan Default Consolidation you must have at least one Direct Loan and agree to repay under the Income Contingent Repayment (ICR) Plan or have made satisfactory repayment arrangements on the defaulted loan(s). If you do not have a Direct Loan you must provide proof you have been unable to obtain a Federal Consolidation Loan with a FFEL consolidation lender or have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them.
For a Federal Default Consolidation Loan you must have at least one FFEL loan and have made satisfactory repayment arrangements on the defaulted loan(s). For the purpose of consolidation, three consecutive, voluntary, on-time, full monthly payments on a defaulted FFEL or Direct Loan constitute satisfactory repayment arrangements. Borrowers must work with their current loan holders to set up reasonable and affordable payments.
Note: Borrowers who are in default also should be made aware of the addition of collection cost to their loan(s). When a defaulted Direct Loan or FFEL is included in a consolidation loan, collection costs of up to 18.5 percent of the outstanding principal and interest are added to the outstanding balance.
For further information on defaulted student loans:
What if I am In Default
Guide to Defaulted Student LoansStudents should always try to consolidate their loans using one of the lenders/servicers, which presently holds the loans. To consolidate into the Federal Family Education Loan Program (FFELP) contact your lender or servicer. Or contact:
Michigan Higher Education Student Loan Authority at 1-888-MHESLA-1 or www.Mi-StudentAid.org. If your lender uses Nelnet Service Corp. (formerly UNIPAC) as a servicing agent you can contact 1-888-486-4722 or www.nelnet.net.
To consolidate into the Federal Direct Loan Program (FDLP) contact:
Direct Loan Consolidation Center at 1-800-557-7392 or www.loanconsolidation.ed.gov.
If you are a Baker College student and have questions about consolidation, feel free to call our Student Loan Advisors at 810-766-4285 or 810-766-4213 or toll free 1-888-690-7912. You can also e-mail them at loans@baker.edu and they will be happy to assist you.