Federal Stafford Loan Consolidation FAQs
Federal Stafford loan consolidation is a helpful financial tool that allows student loan borrowers to merge several types of federal loans into one new loan with a lower monthly payment. Many of the questions on this page can lead to other questions - the laws and regulations surrounding federal loan consolidation are designed to provide optimal benefits to you, the borrower.
- What are the benefits of federal consolidation loans?
- Who is eligible for Stafford loan consolidation?
- What is the interest rate?
- Why consolidate in my grace period?
- What types of loans may be consolidated?
- What about private loan consolidation?
- What about credit cards, car loans, etc.?
- What about consolidating with my spouse?
- I consolidated a year ago, can I do it again?
- How is the consolidation loan repaid?
- Are there any fees to consolidate?
- Is there a credit check required to consolidate?
- Are there any early payment/repayment fees or penalties?
- How do I apply for a consolidation loan?
- Do I continue making loan payments while my consolidation application is in process?
- How long does a consolidation take?
- What do I do if I'm not eligible?
- Can I defer or forbear?
- Reduces your monthly payment up to 53% - you'll have more cash every month!
- Simplifies your finances - only make one payment a month
- Improves your credit rating
- Saves you money today when you need it most
- Provides flexible repayment options
Federal Stafford loan consolidation allows borrowers (parents or students) to combine several federal student loans into one loan to simplify loan repayment. Because repayment can be spread over a longer time period, your monthly payment amount will likely be lower and because there are no penalties for extra or early repayment, you can make larger monthly payments when it becomes affordable to.
To be eligible for Stafford Loan Consolidation, you must have at least one Direct Loan or FFEL loan that is not in an "in-school" status. Defaulted loans may be consolidated provided the borrower makes satisfactory repayment arrangements through their loan servicer.
The rate will be a fixed rate equal to the weighted average of the interest rates on your existing loans rounded up to the nearest one-eighth of one percent.
To calculate your interest rate, check out this Consolidation Calculator from StudentLoanConsolidator.com.
Consolidating your loans while in grace period can help to lower your monthly payments once it's time to repay. While not required, consolidation is a great way to get your loans in order before repayment officially begins..
The optimal time to consolidate is at the end of your grace period because your grace period will end once this process is completed. Therefore, consolidating early is not recommended unless you intend to begin repayment immediately.
- Stafford Loans - Subsidized and Unsubsidized
- Federal Direct Stafford Loans - Subsidized and Unsubsidized
- HEAL/HPSL Student Loans
- Parent PLUS Loans
- Federal Direct Parent PLUS Loans
- Federal Consolidation Loans
- Federal Direct Consolidation Loans
- Perkins Loans
- Nursing School Loans
It's not a bad idea to consolidate your private student loans, but this must be done separately from federal loans. Combining federal and private student loans is not optimal because it removes any federal loan benefits or protections.
Consolidating your federal Stafford loans first is very important, because in doing so, you reduce the number of open lines of credit (loans) you have. This boosts your credit score, enabling you to obtain better terms for private loan consolidation. For more information on consolidating private loans, visit StudentLoanConsolidator.com.
Unfortunately, you cannot combine non-federal loans of any kind with federal Stafford loans. Why? Because they are different types of loans. Federal Stafford loans are backed by the US Government; if a Stafford doesn't pay their loans, the government pays the lender, and then obtains payment from the student. The lending institutions (typically banks) know that they will always get their money back, which is why they can offer Stafford loans at such low rates compared to other kinds of loans.
Private loans, such as credit cards, car loans, mortgages, etc. are backed by an individual's creditworthiness and collateral. Lending institutions take higher risks in loaning money privately than through the government. The government and the banks will not permit low-risk loans to be combined with high risk loans, and so you cannot consolidate other forms of debt with your federal Stafford loans.
However, consolidate Stafford loans to improve your credit rating, and you may be able to qualify for better interest rates on your private loans when you refinance them.
Only loans in your name may be consolidated together. Stafford loans may not be consolidated with a spouse's, nor with a parent's PLUS Loan.
Only under 3 conditions:
- If you include at least one other FFEL or Direct loan into the new loan
- If the loan is in default or has been submitted to a guaranty agency for default aversion
- If you plan to apply for Public Service Loan Forgiveness
The first payment is due no more than 60 days from the date the Consolidation loan is disbursed. Repayment plan choices include:
- Standard payments (fixed monthly payments over a fixed time)
- Graduated payments (payments which gradually increase over the years)
- Income-Sensitive payments (variable payment amounts based upon annual income) and
- Extended payments (more than $30,000 over a 25 year period or more than $60,000 over a 30 year period).
No, there are no fees to consolidate federal Stafford loans.
No, there is no credit check, because your federal Stafford loans are guaranteed by the US Government. However, consolidation will improve your credit rating! Click here to find out how.
No, there are no early repayment penalties for a Stafford loan consolidation. To make extra payments, consolidate now, and then when your payment schedule begins, simply specify "Extra payment to principal" on your early payments.
Did you know that early repayments are interest-free? It's true! Every dollar beyond your required monthly payment is paid towards the principal - it's like an interest-free payment!
The federal Direct Loan Consolidation application can be completed online at the Department of Education's website, LoanConsoldiation.ed.gov.
Yes! Until you are notified that your loans have been paid off through the consolidation process, you should continue to make your Stafford loan payments. Since consolidation can take anywhere from 30 - 90 days, it's important that you don't fall behind on payments. Once your consolidation is complete, you'll receive a new repayment schedule, with your new monthly payment and due date.
Consolidation can take anywhere from 30 to 90 days; in rare cases it may take longer. The reason this takes as long as it does is that your payoff statements (called LVCs - Loan Verification Certificates) need to be retrieved from your lenders, which can take time.
If you've previously consolidated, or there are other conditions which prohibit you from consolidating your Federal Stafford loans, there are a few options you can pursue:
- Consider refinancing a home or investment property to pay off the loan. If you've previously consolidated at high rates, using this option will give you tax benefits and still be cheaper than the rates you are paying now.
- Consider a personal line of credit from your bank or credit union.
- Consider a private loan consolidation.
Yes! One of the greatest benefits of federal Stafford loan consolidation is that you retain all your federal borrowing privileges, such as:
- Deferment of your consolidation payments when you return to school
- Forbearance of your consolidation for up to 36 months
- Forgiveness of your entire loan under certain programs
How do you defer? Once you consolidate, you will receive paperwork for your payment schedule. At that time, you can request a deferment or forbearance form from your loan servicer.
Did you know that your deferment and forbearance clock resets when you consolidate? It's true! If you've already used part of a deferment or forbearance on your existing federal Stafford loans, when you consolidate, it's essentially a new loan, so your deferment and forbearance clocks reset, giving you a clean start!
Consolidating is a great option if you want to easily manage your multiple loans or increase your monthly cash flow - by consolidating, you extend your repayment term and get additional discounts on your existing rates, which reduces the monthly payment you make.
Depending on the total amount of your consolidation loan, the government has set the following repayment periods:
|Loan Balance||Repayment Period|
|$30,000 - $39,999.99||20 years|
|$40,000 - $59,999.99||25 years|
|$60,000 and above||30 years|