Fed student loan consolidation
Consolidation loans, like all federal education loans, do not have a prepayment penalty, so aggressive payments can be made to save time and money. Each of them may have different terms, including interest rates. Getty Images 2 —This content is subject to copyright. Most federal education loans are eligible for consolidation after you complete or separate from medical school. One of the myths of consolidation is that it makes your debt less expensive by lowering your interest rate. Access to a paper application and additional directions are also available on this website. Federal consolidation and private refinancing are very different.
Most federal education loans are eligible for consolidation after you complete or separate from medical school. Here are four things to consider before you make the leap. Consolidation usually gives you more repayment options, but it can limit them too. Historically, that may have been accurate, since consolidation was often used as a way to lock in a low interest rate on variable-rate loans, says financial aid expert Mark Kantrowitz. Private consolidation is a completely different story, though. Consolidation can affect your eligibility for forgiveness. How to Consolidate If your loans are in good standing, you can complete the Direct Consolidation Loan application online at: May negatively impact grace, deferment, or forgiveness options. Borrowers who graduated before , when the government shifted to Direct Loans, for example, need to consolidate their loans to access the latest income-driven plan, Revised Pay As You Earn. Parent PLUS borrowers most consolidate their loans into the federal Direct Loan program if they want to enroll in the only earnings-based plan available to them, income-contingent repayment. Federal consolidation and private refinancing are very different. May extend the repayment term up to 30 years - depending on the amount of debt and the repayment plan selected. Interest Rates for Consolidation Loans The interest rate for Direct Consolidation Loans is fixed for the life of the loan and is based on the weighted average of the interest rates of the loans being consolidated. May lose borrower benefits such as interest rate discounts or principal rebates. Simpler, though, is not always better, so the decision to consolidate should be made carefully. May possibly provide a lower monthly payment. May create a longer repayment term, which can result in higher interest and total repayment costs. Which Loans Can Be Consolidated Access to a paper application and additional directions are also available on this website. You can consolidate but not refinance your federal loans within the federal system—to refinance, you have to go to a private lender. Creates a single payment to a single servicer. By combining your interest rates, you also lose the ability to employ a favorite tactic of financial planners for paying down debt: Repayment on a consolidation loan will generally begin within 60 days of disbursement, unless the borrower qualifies for a deferment or forbearance. Provides a fixed interest rate. Consolidation also opens up the door to extended repayment plans, in which your term can stretch up to 30 years depending on how much debt you have.
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