Federal Consolidation Loans

A federal consolidation loan is a great option to lessen the burden of paying

off student loan debt, but it may not be for everyone. Take time to consider your individual circumstances, get the facts, and if you decide to consolidate, carefully

choose a reputable lender that takes your best interests into consideration.

Keep in mind that extending your repayment term may increase the

total interest you pay.

What Is Loan Consolidation?

Loan consolidation combines one or more eligible federal student loans into a new loan

with a single lower payment, longer repayment period, and a fixed interest rate.

Which Loans Can Be Consolidated?

Most federal student loans can be consolidated, including those issued under the Federal

Family Education Loan Program (FFELP), the Federal Direct Loan Program (FDLP), and

other federal programs. Private/alternative loans from banks, schools, or relatives cannot be consolidated in a federal consolidation loan.

Eligible Loan

• Subsidized Stafford
• Unsubsidized Stafford
• Direct Subsidized Stafford
• Direct Unsubsidized Stafford
• PLUS
• Grad PLUS
• Perkins
• FFELP Consolidation
• Direct Consolidation

What Are the Advantages of Student Loan Consolidation?

. Lower monthly payments by up to 51% or more

. Extended repayment period based on your total education indebtedness-up

to 30 years

. Fixed interest rate for the life of the loan, protecting you against future rate increases

. Convenience, because all of your loans are now combined into one loan, you make

just one payment to one lender

. Keep your current federal student loan benefits: deferment and forbearance

eligibility, loan discharge in the event of death or permanent disability, and no fees

or prepayment penalties

Repayment Plans

There are four different repayment plans available with loan consolidation that will provide borrowers

with the flexibility they need for their specific financial situation.

Standard - Level payment plan with lowest interest costs but a higher monthly payment.

Graduated - Lower starting payments that increase over time, somewhat higher interest costs.

Income Sensitive - Payment plan based on borrower income that may provide the lowest payments initially, but will have higher interest costs.

Extended Balances over $30,000 may qualify for extended repayment terms - up to 25 years.

You can view repayment plan information here.

To see what each of these repayment plans specifically means to your situation, call or visit your lenders website to use their repayment calculator.

Six Steps to Making a Decision

1 . Identify your education loan situation - National Student Loan Data System (NSLDS)-

www.nslds.ed.gov and National Student Loan Clearing House (NSLC)-w ww.nslc.org/students

You should also check your lender's website.

2. Know when to consolidate - Specific rules govern when eligible loans can be consolidated. In addition, the timing of your consolidation can affect your interest rate. Student loans with variable rates are reset each July 1. Consolidating while rates are lower can result in a lower fixed rate on the consolidation loan.

3. Decide which loans to consolidate - You may choose to consolidate one or all of your eligible loans.

4. Identify your lender options - Carefully select a consolidation lender. Remember, you are committing to a long-term financial relationship so get the facts before consolidating. Look for experience, good customer service and competitive borrower benefits.

5. Understand your repayment options - The repayment plan selected will impact the amount of time it takes to fully repay the loan, the size of the monthly payment, and the overall interest costs.

6. Select an application process - There are several ways to begin your loan consolidation application. Review the options you lender offers and select the option most comfortable for you.

What Else Should I Consider Before Consolidating?

. With the longer repayment term comes the likelihood of higher overall interest costs. If payments are affordable, consider repaying the loans without consolidating.

. Some campus-administered programs, including Perkins loans, can lose forgiveness or interest subsidy benefits

. Timing is very important when consolidating. For most borrowers * , when you consolidate during your grace period or during a deferment, the interest rate used to calculate your fixed interest rate will be 0.60% lower

. Current loans may have benefits (such as interest rate reductions or principal reductions) that will be forfeited if they are put into a consolidation loan - know what you have before you lose it.

. When selecting a consolidation lender, shop carefully - get all the facts before consolidating and begin by contacting your existing lender or loan servicer.

.  Only non-consolidated loans disbursed before 7/1/06 are affected by this statement. A possible change to this would be, "For some loans" OR "For variable rate loans" rather than "For most borrowers"