Consolidating Your Government Student Loans

A Consolidation Loan allows you to combine your federal student
loans into a single loan with one monthly payment, which can be
significantly lower than the payment required under the standard
10-year repayment option. Under the Federal Family Education
Loan (FFEL) Program, banks, secondary markets, credit unions,
and other lenders provide the Consolidation Loans. Under the
William D. Ford Federal Direct Loan (Direct Loan) Program, the
federal government provides the loans.

Most federal education loans are eligible for consolidation,
including subsidized and unsubsidized Direct and FFEL Stafford
Loans, SLS, Federal Perkins Loans, Federal Nursing Loans, and
Health Education Assistance Loans. Private education loans are
not eligible. PLUS Loan borrowers (parent borrowers) also can
consolidate their loans.

To apply for a Direct Loan Consolidation or an FFEL
Consolidation the borrower must contact the lender and complete
an application. Most lenders provide borrowers with the ability
to apply on-line or request an application over the telephone.
Once an application is completed and submitted, the lender will
request information from the borrower's other lenders or from
its own system to determine the amounts outstanding on the
borrowers loans. The borrower will then receive notification
about the consolidation loan, normal consumer disclosures, the
amount owed, and if appropriate, where to make payments.

Always Consider the Cost

You should keep in mind that although consolidation can simplify
loan repayment and lower your monthly payment, it also can
significantly increase the total cost of repaying your loans.
Consolidation offers lower monthly payments by giving borrowers
up to 30 years to repay their loans. So, you'll make more
payments and pay more in interest. In fact, in some situations
consolidation can double your total interest expense. If you
don't need monthly payment relief, you should compare the cost
of repaying your unconsolidated loans against the cost of
repaying a consolidation loan. You also should take into account
the impact of losing any borrower benefits offered under
non-consolidated repayment plans. Borrower benefits, which may
include interest rate discounts, principal rebates, or some loan
cancellation benefits can significantly reduce the cost of
repaying your loans.