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Consolidation

 

Direct Consolidation Loan:  If a borrower has both FFELP and Direct Loans,

they might consider consolidating under a single Direct Consolidation Loan,

especially if their loans are serviced by more than one company.  While a

consolidation may simply the borrower’s payments, it will definitely increase the

borrower’s loan expense due to the increased loan period.  Some consolidation

loans have up to a 30 year repayment period.  Additionally, interest rates are

fixed on consolidation loans and variable interest rates are rounded up to the

nearest 1/8th%.  Also, older original loans may have benefits in place that

would be lost as a result of consolidation.  Examples include interest rate

discounts, principal rebates and, in some cases, loan cancellation benefits.  Consolidation is forever and once loans have been consolidated into a new loan, they cannot be removed to have rights or benefits returned.

 

A borrower should carefully study the consolidation checklist before making any decisions regarding consolidation.  Visit http://studentaid.ed.gov/repay-loans/consolidation#checklist for more details.  One of the most common questions asked about consolidation is “can my parent’s PLUS loans be added to my consolidation loan?”.  The answer is NO.  Loans are issued under social security numbers and they must remain under the original social security #.  If a parental PLUS borrower has student loans of their own and wish to add their PLUS loans into their consolidation, they may do so, but the loans cannot be transferred to the student borrower.