Top Questions people ask when they decide to opt for Consolidation of school loans

The easier way to pay off your school loan is to consolidate your loan. Of course, you would like to know how consolidation of school loan works. Following is a list of frequently asked questions that will guide you about the basic procedure, eligibility requirements and etc.

1. How to apply for a consolidation loan?

   First, try to find out which type of consolidation loan you are interested in, either private or federal. Once this is decided try to search for companies that offer good deals. Find out their terms and conditions, their interest rates, monthly paying procedures and other eligibility criteria.

2. How does loan consolidation work?

   Once the consolidation loan is approved from the consolidating company, all the remaining amount which you are liable to pay is paid to your lender with the total balance rolling over into one consolidated loan. The end result is that you have only one fixed-rate loan to pay.

3. How to determine the eligibility?

   If all the loans are in grace, repayment or in deferment/forbearance, one may be eligible for loan consolidation. Loans that are in an in-school status cannot be consolidated until graduation is complete or the student has left school.

4. How to consolidate loan with the grace rate?

   You can consolidate your loan during the grace period. It is important to indicate the month and year of the grace end date on the consolidation loan application. The rates in effect at the time of applying for the consolidation loan will be used in the weighted average calculation to determine the rate on the consolidated loan.

5. How to find out the consolidation loan payment?

   Your payments and total amount of interest paid may look like input various interest rates into the companies ‘Loan Consolidation Calculator’. After the application has been approved, the disclosure and monthly account statement will include the exact payment amount and interest rate.

6. What loans are eligible for consolidation?

   Following loans are eligible for consolidation: Federal Family Education Program Loans (Stafford, PLUS, SLS) Federal Direct Loan Program Loans (Stafford, PLUS) Perkins Loans (NDSL) HPSL (Health Professions Student Loans) NSL (Nursing Student Loan) HEAL (Health Education Assistance Loans), and FISL

7. What are the benefits of school loan consolidation?

   It helps in simplifying your student loan portfolio by combining your entire educational loans under one debt. It has fixed interest rate. Moreover, it reduces the monthly payments by extending the repayment term. Allow you to make only one payment every month.

8. What key things should be considered regarding consolidation?

   One should always seek for available deferments, interest rates, repayment incentives and service levels.

9. Is there a minimum balance required to get a consolidation loan?

   Lenders do set a minimum balance amount but it varies from lender to lender.

10. Can private loans be consolidated with federal loans? If so, are the interest rates same?

    Private or alternative loans cannot be consolidated into Federal loans.

11. Can re-consolidation happen over the existing federal consolidation loan?

    You cannot re-consolidate an existing Federal Consolidation loan into another Federal Consolidation loan. You can obtain a new Federal Consolidation loan, but only in the following instances:
    • If you are consolidating your existing consolidation loan with a new eligible loan obtained after the original consolidation loan was made.
    • If you are consolidating your original consolidation loan with at least one other eligible loan which is not included in the original loan.

12. Can pre-payment be made in consolidation loan?

    Yes, you can pre-pay your consolidation loan anytime without penalty. As a matter of fact, it is always smart to pay extra on your loan's principal whenever possible, as it will reduce the interest you pay over the life of your loan.

13. Can husband and wife consolidate their loan together??

    No, married couples can not consolidate their eligible student loans together. Each of you may, however, apply for a separate loan consolidation.

14. Is there any fees to consolidate?

    No. Unlike the Stafford and PLUS Loan Programs that have loan fees, a Federal Consolidation loan borrower does not have to pay any fee to consolidate.

15. What questions should be asked from the lender when planning to consolidate school loan?

    Ask your lender what your monthly payment will be and how long it will take to pay the total loan balance. If your lender offers you an extended repayment period so that you can have a lower monthly payment, be sure you consider that option carefully.

    A lower monthly payment may seem to appeal, but it may also cause you to pay a lot more interest. Make sure you ask your lender about incentives. Lenders may offer a break on your interest rate if you agree to make on-time payments for a specified period of time.

16. Is it ever financially unwise to consolidate?

    Generally, it's not a good idea to consolidate if the interest rate you will pay on your consolidation loan is higher than the rate you are paying on your current loan.

If you still have any doubts or queries about school loan consolidation, you can always consult the financial aid officer at your school.