Typically speaking, you can not consolidate your loans before you graduate. However, you can consolidate your loans under the Direct Loans Programs under certain conditions for example, if you are under economic hardship while you are still enrolled in school. When you opt for school loan consolidation, your loan is automatically placed in an ‘In-school’ status giving you an opportunity not to make payments during that period of time.
One good reason to consolidate your loans while in-school is that you get your loans consolidated at a lower interest rate. Although, you may lose your six month grace period when you consolidate your loans but you can lock the current low interest rate on your loans. As the rate increases, the low fixed interest rate will help you save hundreds and thousands of dollars over the life of the loan.
It is not mandatory to make payments while you are in-school. What you can do is place your new consolidation loan into an in-school deferment status. This will help you not to make payments until you are finished with school. What you have to keep in mind is that once you consolidate, you can no longer avail the grace period option. However, choosing a locked lower rate can prove to be more beneficial over the life of the loan than the grace period. Moreover, during the in-school deferment, the government will be paying your subsidized loan interest.
Eligible loans for in-school consolidation:
- Stafford/GSL and FISL Loans.
- HEAL Loans.
- Perkins/NDSL Loans.
- Nursing Loans (NSL).
- SLS and ALAS Loans.
- HPSL Loans (including LDS).
- PLUS Loans.
- Consolidation Loans.
Qualifications for in-school consolidation:
- Have at least one Direct Loan or FFEL.
- Stafford Loan in an ‘in-school’ status.
- Enrolled in a school participating in the Direct Loan Program.
- Has a Direct Loan, but currently does not attend a school participating in the Direct Loan Program.
Why and how in-school consolidation makes sense?
In-school consolidation helps you lock in a low, fixed interest rate to pay over the life of the loan. Some other reasons are as follow:
- The Direct Consolidation Loan program for in-school consolidation does not require a minimum balance, letting the borrowers consolidate small amounts.
- Borrowers may select the same 10-year maximum repayment term similar to their current Stafford loan, keeping the cost of borrowing low when repayment begins.
- Borrowers can consolidate again later, adding new Stafford loans, health profession loans and Perkins loans to their existing consolidation loan. This will help provide an overall lower interest rate even if the new loans begin with a high interest rate.
Companies providing in-school consolidation:
Edfed
EdFed offers even greater benefits to students who choose to do an in-school consolidation through them.
- EdFed offers a 0.25% interest rate reduction for using auto-debit to make payments.
- Incase a borrower makes 36 on-time payments, s/he will receive an extra 1% interest rate reduction on their already low fixed interest rate.
- You will end up with the very low interest rate of 3.5%.
NextStudent
In-school borrowers can receive a student loan consolidation rate of 4.75 percent, allowing them to avoid the July 1 increase on their federal student loan rates, every year.
The company’s borrower incentives include:
- One easy payment.
- No prepayment penalties.
- Longer payment term.
Student Benefit Services
- Cuts your interest rates by 1.25%
- Lower your monthly payments by 50%
- Defer your payments for up to 3 years
- Bundle all your loans into one easy-to-manage loan
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