Consolidation
All BORROWERS: While we can offer no guarantee regarding future interest rates, we are still near historic lows, but in an environment of raising rates. It is unlikely that rates will soon return to those available now. (The benchmark rate that will be used to reset your variable rate loans on 7/1/06 is currently up 1.65% from last year. That's an additional $165, per year, per $10,000 of debt). Sometime in the future rates may again fall. When this will happen and how far they will fall is unknown.
For graduating students, those leaving school, or those who expect they will not be borrowing in the future, April and May is always the time to take a hard look at consolidation. If, after looking at your options, you plan to consolidate some or all of your loans, you should undoubtedly apply now (before July 1) to lock in the current low interest rate.
For continuing students, you have a harder decision, but you owe it to yourself to take a look at consolidating all of the eligible loans that you've borrowed to date. As of June 30, 2006 "in school" consolidation will end. If you consolidate now you will be locking in the current low rates on existing loans only. Regardless of your decision now on existing loans, future loans will carry a 6.8%interest rate fixed for life.
You do NOT have to include all of your loans in a consolidation. For example, if you want to keep the Perkins loan separate, because you might be eligible for partial cancellation, you may do that. Do be aware this will result in a loan payment separate from the consolidated loan payment. If you anticipate the additional loan payment would create a financial burden, you should probably include the Perkins loan in the consolidation. A defaulted student loan does harm your credit rating. Finally; because interest in a consolidation is a weighted average of your existing loans, Perkins, Pharmacy and Nursing loans are fixed rates, they neither help nor hurt your overall interest rate.
You should also check with your Stafford loan lender for information on whether a consolidation loan is right for you. Keep in mind the following:
Benefits of consolidation:
- Locking into a fixed interest rate for the life of the loan.
- Combining payments into one affordable monthly payment with single point of contact.
- Deferment eligibility.
- Extend your repayment, 12 to 30 yrs based on the amount borrowed.
- Choose a flexible repayment plan that works for you.
Drawbacks of consolidation:
- Federal Perkins and Nursing Loan borrowers-Interest will begin as soon as you consolidate rather than 9 months after you leave school (12 months for Health Professions Pharmacy Loans);
- Perkins Loan borrowers will forfeit all cancellation benefits otherwise available to Perkins borrowers.
- Primary Care Loans for med students and Institutional Loans cannot be included in a consolidation loan.
- Possible higher interest rate than the rate on some of the loans currently being held. (All federal loans held by the Bursar's Office that are eligible for consolidation are at a fixed 5%.)
- Possible payment of more interest with repayment over a longer period of time.
- Loss of grace period if consolidated while still "in school".
- May affect deferment eligibility.
- May lose borrower benefits already in place.
If you have questions regarding consolidation or need information about your Federal loans, you may contact your Stafford Loan lender or access the following websites.
The Bursar's Office does not support or endorse any one loan consolidation agency. The following consolidation options are listed for your convenience only.