|By David Pilley on March 7, 2011
Consolidating your student loans makes repayment much simpler. Instead of looking at multiple accounts with different interest rates, you’re handling just one. The loan’s term might be lengthened, meaning you’ll be paying more interest in the long run. However, you may be eligible for a tax deduction after having paid a certain amount of interest on the loan, so this may be another positive of consolidation. Once you decide on consolidating your student loans, the question becomes how to do so.
First, you need to be aware that federal loans and private loans cannot be consolidated together. You can consolidate them separately (consolidation of private student loans), but they cannot be combined together because of differences in loan terms. Federal Stafford, PLUS, and Perkins loans are the most common types of loans that can be consolidated. Along with these, there are many more eligible for consolidation, including Health Education Assistance Loans, National Defense Student Loans, Nursing Student Loans, and Loans for Disadvantaged Students.
The proper timeframe is also important in determining your eligibility for consolidation. If you are in your grace period or you have already started repaying the loans, you can qualify. The amount of your loans must also total over $7,500 to be able to consolidate. You can only consolidate your student loans once, unless you have gone back for further college education (or if you had dropped out but you have reapplied to complete your undergraduate degree) and you have acquired new loans.
To get the consolidated loan, you must first gather all of your paperwork from your loans, outlining each loan amount, interest rate, monthly payment, and loan term. You then need to contact the lenders who gave you the loan and notify them that you are looking at consolidating. You can inquire about whether or not it is possible to get a reduction in the interest rate. You can also meet with a counselor at your school’s financial aid office to get further advice on whether or not consolidation is your best choice.
It’s important to know that if all of your student loans are from the same lender, you must consolidate with that lender. If your loans come from different sources, then you have options. You can then consolidate your loans through the Department of Education’s Direct Loan Program. Some potential lenders, but not all, might offer a reduction in interest rate after a certain amount of payments made on time, so look around.
Finally, you will fill out the application and promissory note, and you will start paying off your new consolidated loan in 30 days. An online resource you can use is http://loanconsolidation.ed.gov. Here, you will find frequently asked questions, as well as the proper forms you need to apply for your consolidated loan.