Loan Consolidation - Frequently Asked Questions
What are Federal Consolidation Loans?
This program allows you to combine all of your federal education loans into a single, more manageable loan, allowing you to make one monthly payment and extending your repayment period up to 30 years depending on the loan amount. You may also be able to secure a lower fixed interest rate for the life of the loan.
Who can consolidate?
Borrowers who are enrolled in school, in their grace period or already in repayment on each loan chosen for consolidation.
Prior to July 1, 2006, borrowers who are enrolled in school must request the following from their lender:
Request to enter repayment early - Borrowers must request that the lender allow them to enter repayment early. This will require the borrower to permanently forfeit their grace period on the loans in question. Note: Lenders are not required to grant a borrower’s request to enter repayment status early.
Request to be placed in an in-school deferment status – Borrowers who also request to be placed in a deferment status are eligible for a deferment interest rate for the set of loans being consolidated. This rate is the same as an in-school rate and can be used by the lender as they calculate the weighted average interest rate for the consolidation loan.
Note: Effective July 1, 2006, borrowers enrolled in school no longer have this option.
Borrowers who have more than one loan to consolidate.
Borrowers who are seriously delinquent or in default may be eligible to consolidate.
If loans are in default, a borrower must be in repayment on the defaulted loans or agree to repay the new consolidation loan under the income-sensitive repayment plan. For additional information, a borrower can call OGSLP's Recoveries department at 405.234.4375 or 800.522.8022.
What type of loans can be consolidated?
Federal Stafford (subsidized and unsubsidized)
Federal PLUS
Federal Supplemental Loans for Students (SLS)
Federal Consolidation
Federal Direct Student Loans (FDSL)
Federal Insured Student Loans (FISL)
Federal Perkins Loans
Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)
Federal Nursing Student Loans (NSL)
Health Education Assistance Loans (HEAL)
How is the interest rate calculated?
For portions attributable to FFELP, FDSL, FISL, Perkins, HPSL, or NSL loans (HEAL requires a different calculation), a fixed interest rate is determined by taking the weighted average of the interest rates, rounded up to the nearest one-eighth of one percent, not to exceed 8.25%.
Example - Calculating the Weighted-Average Interest Rate
Step 1
Multiply the outstanding balance of each loan to be consolidated by that
loan's current interest rate. A variable rate loan should be included
in the calculation
at the rate at which it is currently accruing.
Example: Outstanding loan balances are $3,500, $3,200, and $5,500 respectively - for a total of $12,200. The current interest rates for the loans are 7%, 5%, and 3.42%, respectively.
$3,500 X .07 =$245
$3,200 X .05 = $160
$5,500 X .0342 = $188.10
Step 2
Add the results of all calculations
made under Step 1. Then divide this sum by the outstanding balance of all loans
being consolidated.
Example: $245 + $160 + $188.10 = $593.10
$593.10 / $12,200 = .0486 or 4.86%
Step 3
Round the result of Step 2 up to the nearest eighth of one percent,
not to exceed 8.25%.
Example: 4.86% is rounded up to 5%
Can borrowers reconsolidate their existing consolidation loan?
Borrowers who currently have a consolidation loan are not eligible for a subsequent consolidation loan unless:
A borrower has obtained a new eligible loan after the date the existing consolidation loan was made.
The borrower is consolidating an existing loan with the consolidation loan regardless of whether it was made before or after the existing consolidation loan.
Borrowers can request to add new loans to an existing consolidation loan within 180 days of the date the consolidation loan is made.
Note: When reconsolidating consolidation loans, it is important to note that the weighted average is calculated on the current fixed rate of the consolidation loan and the rate of any other loan(s) being included in the new consolidation loan.
Who do borrowers contact regarding consolidation?
Borrowers may consolidate loans with any eligible consolidation lender in the FFEL Program even if the borrower's loans are held by only one FFEL holder.
If a borrower's loan holder does not offer loan consolidation or unable to obtain an income-sensitive repayment schedule, the borrower may apply to any other loan holder that participates in loan consolidation.
Borrowers may access information about their federal student loans and other sources of federal financial aid by going to the National Student Loan Data System (NSLDS) Web site at www.nslds.ed.gov.
Is consolidation always the right decision to make?
Borrowers should consider the following when making consolidation decisions:
How much will the total interest cost increase based on smaller installments but a longer payment period?
Will consolidation affect the terms of the borrower's current repayment agreement? Consolidation may adversely impact deferment options and may negate any borrower benefits the current loan holder may provide, such as reduction in interest rates for on-time monthly payments.
Is Perkins consolidation a good thing? It depends. Consolidation provides the convenience of making one monthly payment, however a Perkins borrower forfeits any loan forgiveness benefits and becomes responsible for interest that may accrue during periods of deferment.