Consolidation Loans

Information below is reprinted from the "Student Guide" published by the U.S. Department of Education.

A Consolidation Loan is designed to help student and parent borrowers simplify loan repayment by allowing the borrower to consolidate several types of federal student loans with various repayment schedules into one loan. If you have more than one loan, a Consolidation Loan simplifies the repayment process because you make only one payment a month. Also, the interest rate on the Consolidation Loan may be lower than what you're currently paying on one or more of your loans. If you're in default on a federal education loan, you may receive a Consolidation Loan if certain conditions are met.

You have the option of consolidating your loans and extending your repayment period for up to 30 years.  This option allows you to make smaller payments, but will cost you more in interest.  If you are combining multiple loans at various interest rates, the interest rate for your consolidation loan will be a weighted average.  Keep in mind that your federal loans have grace periods, but when you consolidate, you will lose the grace period (unless you consolidate at the end of the grace period). You may also forfeit deferment options and borrower benefits.

Both the Direct Loan Program and the FFEL Program offer Consolidation Loans. Direct Consolidation Loans are available from the U.S. Department of Education. FFEL Consolidation Loans are available from participating lenders such as banks, credit unions, and savings and loan associations.

A lender may not refuse to consolidate your loans because of 

• the number of type of loans you want to consolidate.
• the type of school you attended.
• the interest rate you would be charged on a consolidation loan.
• the types of repayment schedules available to you.

Click here for a comparison of standard loan repayment with and without consolidation.

If you have been satisfied with the service that you have received from your current lender, we suggest that you consolidate with that lender.

FFEL CONSOLIDATION LOANS

Who is eligible for a FFEL Consolidation Loan?

You can get a FFEL Consolidation Loan during your grace period or once you have entered repayment.

If you're in default on a federal education loan, you may be able to receive a FFEL Consolidation Loan. For more information, contact a lender that participates in the FFEL Consolidation Loan Program.

What kinds of loans can be consolidated under a FFEL Consolidation Loan?

Most federal student loans and FFEL PLUS Loans can be consolidated. Other federal student/parent loans such as Federal Perkins Loans may also be consolidated. A participating lender can give you a complete listing of eligible loans.

You may receive either a Subsidized FFEL Consolidation Loan, or an Unsubsidized FFEL Consolidation Loan, depending on the type of loans you are consolidating.

What's the interest rate on a FFEL Consolidation Loan?

By law, the interest rate for a FFEL Consolidation Loan has been the weighted average of the original interest rates of the loans being consolidated, rounded up to the nearest whole percent.

For more information on the current interest rate, check with a lender that participates in the FFEL Consolidation Program.

How do I pay back my FFEL Consolidation Loan?

All the FFEL repayment plans are available to borrowers of FFEL Consolidation Loan.

How can I get a FFEL Consolidation Loan?

You'll be given more information about Consolidation Loans during entrance and exit counseling sessions. You may also contact the consolidation department of a participating lender for an application or more information.

DIRECT CONSOLIDATION LOANS

Who is eligible for a Direct Consolidation Loan?

You can get a Direct Consolidation Loan during your grace period, once you have entered repayment, or during periods of deferment or forbearance. You must consolidate at least one Direct Loan or FFEL Loan. If you don't have a Direct Loan, but you have a FFEL Loan, you must contact a FFEL lender who makes FFEL Consolidation Loans to ask about obtaining a FFEL Consolidation Loan. If you are unable to obtain a FFEL Consolidation Loan or one with income-sensitive repayment terms that are acceptable to you and you are eligible for the Direct Loan Income Contingent Repayment Plan, you are eligible to apply for a Direct Consolidation Loan.

If you are still in school, you may apply for a Direct Consolidation Loan for any Direct Loans or FFEL Loans if you are attending at least half-time and have at least one Direct Loan or FFEL Program loan in an in-school period. (Generally, your loan is in an in-school period if you have been continuously enrolled at least half time since the loan was disbursed.) In addition, if the school you are attending is not a Direct Loan school (RU is not a Direct Loan school), at least one of the loans that you consolidate must be a Direct Loan.

If you're in default on a federal education loan, you may be able to receive a Direct Consolidation Loan. For more information, contact the Loan Origination Center's Consolidation Department at the number listed below.

Loan Origination Center's Consolidation Department
1-800-557-7392
This is a toll-free number.

If you are hearing impaired, you may call the TDD number at

1-800-557-7395

What kinds of loans can be consolidated under a Direct Consolidation Loan?

Most federal student loans and PLUS Loans can be consolidated. Other federal student loans, such as Federal Perkins Loan, are eligible for consolidation. The Loan Origination Center's Consolidation Department can give you a complete listing of eligible loans.

Loans that are consolidated into a Direct Consolidation Loan fall into one of three categories:

• Direct Subsidized Consolidation Loans
• Direct Unsubsidized Consolidation Loans
• Direct PLUS Consolidation Loans

If you have loans from more than one category, you still have only one Direct Consolidation Loan and make only one monthly payment. However, interest rates differ depending on the loan category, as do repayment and deferment options for the borrower.

What is the interest rate on a Direct Consolidation Loan?

For Direct Subsidized and Unsubsidized Consolidation Loans, the interest rate is variable but, by law, this rate has never exceeded 8.25 percent. For Direct PLUS Consolidation Loans, the interest rate is also variable but, by law, has never exceeded 9 percent.

For information on the current interest rate, check with the Loan Origination Center's Consolidation Department.

How do I pay back my Direct Consolidation Loan?

Generally, all the Direct Loan repayment plans are available to borrowers of Direct Consolidation Loans. However, some restrictions may apply. For example, Direct PLUS Consolidation Loans are not eligible to be repaid under the Income Contingent Repayment Plan.

How can I get a Direct Consolidation Loan?

You'll be given more information about Consolidation Loans during entrance and exit counseling sessions. You may also contact the Loan Origination Center's Consolidation Department.