LOAN CONSOLIDATION FAQs

Question 1: What is a Federal Consolidation Loan?

• A Federal Consolidation Loan is a loan that repays all your outstanding eligible federal student loans, and replaces the multiple payments you may be making each month with a single fixed student loan payment.  The interest rate is fixed for the entire term and is equal to the weighted average interest rates of your outstanding loans rounded up to the nearest 1/8%, not to exceed 8.25%.

Question 2:  Why should I Consolidate?

• To reduce your monthly federal student loan payment.

• To have a single lender for your federal loans.

• To take advantage of fixed interest rate structure

• To take advantage of new or renewed payment incentives.

Question 3:  How do I Consolidate?

• Choose and contact a lender.

• Obtain and complete Federal Consolidation Loan application and promissory note.

• Make any required payments on loans being consolidated until consolidation is complete - the process can take up to 60 days.

Once your Federal Consolidation Loan is made, the loans being consolidated will be repaid and you will begin repaying the consolidation loan (typically within 60 days).

Question 4: If all of my loans are with a single lender; do I still need to consolidate?

• Yes.  If you do not consolidate all of your loans, your interest rate may fluctuate annually to a maximum of 8.25%.

Question 5:  Is there a fee to consolidate?

• No fees will be charged for you to consolidate your student loans.  This is what makes the consolidation such a great deal, you can lock in a low interest rate without paying any fees, points etc.  To receive the best interest rate, apply before June 30th of each year.

Question 6:  Are there special rules to determine eligibility?

• You are eligible if all of the following are true:

• You have graduated, left school, or stop attending less than half time.

• Your loans are in grace or repayment status.

• All of your loans are fully disbursed.

Question 7: What loans can I consolidate?

• Federal Stafford and Federal Direct

• Federal PLUS (borrower's name only)

• Federal Perkins

• Federal Nursing Student Loan (NSL)

• Health Professions Student Loans (HPSL)

• Loans for Disadvantaged Students (LDS)

• Federal Insured Student Loans (FISL)

• Federal Consolidation Loans

• Supplementary Loans for Students (SLS)

If you have a Federal Perkins loan, you may qualify for the cancellation(forgiveness)  program if you work in a field which has a national critical shortage such as nursing, teaching, or law enforcement.   If your Perkins loan is consolidated, you will lose the cancellation privilege.

Question 8: Is there a credit check?

• No credit checks are performed to consolidate your loans.

Question 9:  May I consolidate with any loan company?

• If all your loans are with one lender (not one servicer) then you must attempt to consolidate with that lender.  If the lender does not offer an income-sensitive repayment plan, then you have the right to consolidate with another lender.

Question 10: I borrowed from multiple lenders, where can I find a complete list to consolidate all of my federal loans?

• You may access the federal student loan database (NSLDS) www.nslc.org or call TSAC 1-800-342-1663 to get your loan information. 

Question 11: Can I prepay may consolidation loan at anytime?

• Yes,  a consolidation loan can be prepaid at any time without any prepayment penalties.

Question 12: If  I am married, can our loans be consolidated into one?

• Yes, you can consolidate; however, if you divorce, both individuals are still required to pay the entire consolidation balance.  If you need a deferment, both husband and wife must qualify for the deferment.

Question 13: If my loans are in default can they still be consolidated?

   Eligible federal loans that have been in default can be consolidated provided one of the following conditions are met:

• Borrower must have made arrangements with the holder of the defaulted loan (s) to repay amount owed, or

• Borrower has arranged to repay the new federal consolidation loan under income-sensitive repayment terms. (only applies to Stafford loans, Federal Supplemental loans for students, Parent loans for undergraduate students, or Federal Consolidated loans)

• If you're in default on a federal student loan, you still might be able to consolidate, provided the defaulted loan is not subject to a judgment or wage garnishment.

Question 14:  Can I consolidate my loans while I am still in college.

If your Stafford loans were issued under the Federal Family Education Loan (FEEL) program, and you are still enrolled in college, call your lender and request that your loans be placed in repayment status, and then immediately into" deferment status" since you are continuing in college.  Then tell your lender that you want to apply for a federal consolidation loan.  You will be locked into a fixed rate at the time of consolidation.