Student Loan Consolidation Info

Consolidation Loan Checklist

Inventory your student loans.
First things first. Make a list of all your loans, including type of loan, lender, the amount of your loans and the amount of your payments. Don't freak out when you see how many loans you have and how large your payments will be. You're doing this to cut down the number of loans and payment size. Review your loan documents or contact your lenders or loan servicers. Not sure of your current lenders or loan servicers? You can find them by going to the National Student Loan Data System (NSLDS) website.

Calculate Your Monthly Payment
If you are already in a repayment status, you'll know your monthly payments. However if you are still in school or in your grace period, estimate your monthly non-consolidated loan payment based on the current interest rates and your loan balance. You can also check your payment amounts by calling your lenders or loan servicers.

What's a Budget?
Though many people wander through life without knowing where their money is going from paycheck to paycheck, you really need to do one to see if student loan consolidation is for you. Determine a reasonable percentage of your income that can be allocated to your student loan payments. This percentage should be based on a realistic budget. Then see if the amount you calculated above will fit into that budget.

If your payment exceeds monthly percentage, reevaluate your budget and income. Can you trim any areas of your budget? Can you increase your income?

If it's a short term issue (raise in pay, part time job, etc.), consider your deferment or forbearance options.

However, if there is no light at the end of the tunnel, it may be time to consider consolidating your student loans.

Select loans for consolidation.
Determine which of your loans are eligible for consolidation. Determine monthly payment and total interest costs for a consolidation loan and compare the cost of repaying the loans without consolidation.

You also need to consider the impact of consolidation on future deferment options, cancellation options, and other borrower benefits such as interest rate discounts or principal rebates, which can significantly reduce the cost of repaying your loans. You might lose some discharge (cancellation) benefits or deferment benefits if you include certain types of loans in your consolidation loan like Federal Perkins Loans, for example. You can contact the holders of your loans to find out what impacts consolidation will have on your current benefits.

Consolidate Your Loans
Once you have decided consolidation is the best option for you, contact your lender to begin the consolidation process.

If you are eligible for in-school consolidation and you plan to consolidate while in school, be sure to apply prior to leaving school.

If you have graduated, but are still in the grace period, start the consolidation process approximately two months before the end of the grace period. This will allow enough time to have your consolidation loan processed before the grace period expires, yet not so early that you lose too much of your grace period if you have a FFEL consolidation loan. (If you consolidate FFEL loans during the grace period, you will give up whatever portion of your grace period remains. If, however, you get a Direct Consolidation Loan, you retain all of your grace period) Some FFEL lenders offer to hold disbursement of consolidation loans until the end of the grace period to enable borrowers to minimize their interest rate and maximize their grace period. Check with your lender to be certain.

Keep in mind that if you consolidate during your grace period, you can lock in an interest rate at least a half percent lower than the current repayment rate.

When filling out the consolidation application, make sure you provide complete and correct address information, include two references, and sign the promissory note. Miss any of these and you will delay the processing of your application.

If you are already in repayment, continue making payments on your loans until consolidation is completed.
If you need immediate payment relief, request deferment or forbearance.

If you have other questions about consolidation, contact your lender or loan servicer either through their website or toll-free customer assistance number. Check your loan documents for the contact information.