Frequently Asked Questions - Federal Student Loan Consolidation
Federal student loan consolidation is a helpful financial tool that allows student loan borrowers to merge several types of federal student 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 student loan consolidation are designed to provide optimal benefits to you, the borrower. Please feel free to call us at any time, toll-free, at 877-328-1565 and one of our federal loan consolidation counselors will be glad to discuss your personal circumstances.
- Additional info for Private Student Loan Consolidation
FAQ Contents
- What are the benefits of federal consolidation loans?
- Why consolidate with us?
- 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?
- Do you sell your loans?
- What do I do if I'm not eligible?
- Can I defer or forbear?
- Are you a government or private agency?
- Why do stafford loan rates change?
What are the benefits of federal consolidation loans?
- Reduces your monthly payment up to 53% - you'll have more cash every month!
- Locks in your interest rates - protect yourself from future rate increases
- 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 student loan consolidation allows borrowers (parents or students) to lock in today's low rates and 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. Because there are no penalties for extra or early repayment, you can make larger monthly payments when it becomes affordable to.
Why consolidate your Stafford loans with us?
A few very simple reasons:
- When you call us, you can reach a consolidation expert with real answers, not get the runaround
- Fast consolidation turnaround - averaging 30 to 60 days instead of the industry standard 120 - 180 days
Read our Shopping Around for Stafford Loan Consolidation page for more!
Who is eligible for Stafford loan consolidation?
You must have a minimum of $20,000 in outstanding federal Stafford loans.
Want to find out if you are eligible? Request a free, no-obligation information packet or just give us a call toll-free at (877) 328-1565 and we can confirm your eligibility.
Here are the things that are not required:
- You do not need to be employed to consolidate your loans.
- You do not need to have any form of collateral.
- You do not need a cosigner of any kind.
What is the interest rate?
The rate will be a fixed rate equal to a weighted average of the interest rates on your existing loans rounded up to the nearest one-eighth of one percent.
Currently, rates are set to the following starting points:
- Stafford Loans in grace: 6.62%
- Stafford Loans in repayment: 7.22%
- Stafford Loans in repayment prior to 7/1/98: 8.02%
- PLUS Loans: 8.02%
- Perkins Loans: 5%
- HEAL Loans: 4.125%
- Previous consolidations: existing consolidation rate
These rates are starting points and do not represent the final, lower rates you would receive with any applicable discounts.
Consolidations done during the loan "grace" period will be based on a weighted average of the in-school interest rates, which are generally lower. Use our Loan Calculator to help you figure out your new rate and monthly payment.
Please note that we cannot guarantee any interest rate due to the time it takes to process an application. We can only provide rough estimates; you should not rely on these estimates for financial planning! Why? Because consolidation takes between 30 - 60 days, and in that time period, you may be making payments, or your loan status may change. Because your interest rate is determined not only on the type of loan you have, but also on how much you owe, we can make no guarantee except to say that your interest rates will never exceed federally specified, published rates.
Why consolidate in my grace period?
If you are in your six-month post-graduation grace period, you can apply for and receive additional savings. During this six months, Stafford loans disbursed before July 1, 2006 have a 0.6% lower rate. By consolidating during this period, you are able to lock in this discounted rate. If you wait until your grace period is over your rate will increase by 0.6%. Your application must be received in our office before your grace period ends in order to obtain the additional 0.6% discounted rate. When you fill out your consolidation application, be sure to include your grace period end date, and we will complete your consolidation when your grace period expires. If you need assistance determining this date please call 877-328-1565 to speak to a loan counselor.
What types of loans may be consolidated?
- 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 and more...
- Private Student Loan Consolidation
What about private loan consolidation?
It's not a bad idea to consolidate your private student loans. What is a bad idea is combining federal and private student loans, which results in a consolidated private loan. This is bad for many reasons:
- You cannot defer payments on a private loan consolidation if you want to go back to school. You can with federal loan consolidation.
- You cannot forbear payments in case of economic hardship on a private loan consolidation.
- You cannot claim interest as a tax deduction on a private loan consolidation.
- You cannot apply for forgiveness on a private loan consolidation. Certain types of work, such as federal volunteer programs, teaching in economic development zones, and military service, among others, can qualify you to have part or all of your federal loans dismissed by the government.
- If you should pass away, private loans are passed to your next of kin. Federal loans are forgiven.
- Private loan consolidation very often has variable rates, which means you cannot lock in today's current historic low rates. Those rates may be tied to volatile indexes like the Prime Rate, which can jump as high as 13%.
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, visit our private consolidation section.
What about credit card consolidation, car loans, etc.?
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.
What about consolidating with my spouse?
Spousal consolidation is no longer permitted. Sorry.
I consolidated in the past, can I do it again?
It depends. Consolidation is the combination of many loans into one. If you have consolidated in the past with someone other than the US Department of Education, you can't do it again unless:
- You have new loans that were not included in the original consolidation.
- Or, you have multiple consolidations from different lenders.
Call us toll-free 877-328-1565 or email us with questions!
How is the consolidation loan repaid?
The first payment is due no more than 60 days from the date the Consolidation loan is disbursed. Repayment schedule 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).
Are there any fees to consolidate?
No, there are no fees to consolidate federal Stafford loans.
Is there a credit check required to consolidate?
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.
Are there any early payment/repayment fees or penalties?
No, there are no early repayment penalties for a Stafford loan consolidation. The government wants its money back. 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!
How do I apply for a Consolidation loan?
Loan Counselors are available to assist you with the application process. We can help you complete the necessary forms accurately. We make everything as simple as possible. There are three easy ways to apply!
- Apply online using our super-fast consolidation form!
- Apply by phone - call us today toll-free at 877-328-1565!
- Apply by mail - simply download, print, and mail your application to us!
Do I continue making loan payments while my consolidation application is in process?
Yes! Until you are notified that your loans have been paid off through the consolidation process, you should continue to make your Stafford loan repayments. 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, we will send you a new repayment schedule, with your new monthly payment and due date.
How long does a consolidation take?
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 we retrieve payoff statements (called LVCs - Loan Verification Certificates) from your lenders. Some lenders are more cooperative than others.
Do you sell your loans?
There may be certain circumstances under which loans will be sold.
What do I do if I am not eligible to consolidate?
If you've previously consolidated, have loans with just one lender, loans totaling less than $20,000, or other conditions which prohibit you from consolidating your Federal Stafford loans with us, 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. Visit our Mortgage Center for more information.
- Consider a personal line of credit from your bank or credit union.
- Consider a private loan consolidation.
Can I defer or forbear?
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 if you pass away
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.
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!
Are you a government or private agency?
Staffordloan.com is a private company and a member of the Student Loan Network. Our federal Stafford loan consolidation program is backed by the Education Lending Servicing Center and underwritten by Fifth Third Bank, founded in 1858. Our federal Stafford loan consolidation program is part of the Family Federal Education Loan Program (FFELP), which is overseen and managed by the US Department of Education. Click here to read more about us.
Why do Stafford loan rates change?
See our page on the relationship between Stafford loans and Treasury bills!
Why Consolidate?
The very best time to consolidate your Stafford loans is immediately after graduating, before your grace period ends. Doing so allows you to lock in the lowest possible interest rate on your loans.
Consolidating is a great option whenever you want to 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.
Consolidating now is a great time, because interest rates are projected to continue rising, so consolidate your Stafford loans right now!
Repayment Guidelines
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 |
