Consolidation loans are designed to help borrowers simplify loan repayment by allowing borrowers to consolidate several types of federal loans with various repayment schedules into one loan.
Loans that can be included in consolidation are: Unsubsidized Stafford, Subsidized Stafford, PLUS and Perkins. (NOTE: Alternative loans are not included.)
The interest rate is calculated by taking the weighted average of the loans being consolidated and rounding up to the nearest 1/8th%(capped at 8.25%). This calculated rate is then fixed for the remainder of the repayment period.
Loan Consolidation Information
Some of the advantages/disadvantages are as follows:
Advantages:
- Ability to lock in a lower (fixed) interest rate
- Multiple loan payments combined into a single payment
- Payments can be extended beyond ten years (based on the borrower's repayment plan)
Disadvantages:
- The borrower may lose the benefit of a grace period
- The borrower may lose benefits associated with the loan, such as loan forgiveness and repayment incentives
- Extending the repayment term may increase the amount of interest paid over the life of the loan.
Since consolidation loans are so complex and there are so many factors to consider, borrowers should contact their lender/servicer/guarantor for a thorough explanation of the advantages, disadvantages, and procedures for consolidating federal loans.
275 Eastland Rd.