Federal Student Loan Consolidation Simplified

If you have a number of different federal student loans, once you graduate you can streamline your repayment plan through a student loan consolidation program. Consolidating your loans simply means that you take out one big loan that you then use to pay off a number of other smaller loans. Doing this will let you make one payment to a single lender, instead of several; it can also let you spread your payments out over more time, and can save you money on interest. You will need to wait until graduation to take advantage of a federal loan consolidation program, but once you graduate, you can apply right away. 

Step One: Study Your Existing Loans

 First, you will need to examine your existing loans and determine whether they are federal loans or private loans. The only loans you can consolidate with a Federal loan consolidation program are Federal student loans, such as Stafford loans, Perkins Loans, or FFEL or Plus loans. If you have any private loans, you cannot include them in your federal loan consolidation. 

You will also need to check whether any of the loans are in your parents' names. All of the loans you consolidate must be under the same name - you can consolidate all the loans under your name, but your parents must consolidate any loans under their name separately.  

Step Two: Select Your Lender 

Most lenders who provide federal student loans also provide consolidation loans. However, different lenders may have different terms. For example, some lenders will only offer a consolidation loan if your total loan amount would come to a minimum of $7,500.  Others, have different repayment schedules or different interest rates. Most lenders will allow you to calculate your new interest rate and payment schedule. Compare several options before selecting your consolidation loan. 

Step Three: Decide On A Repayment Plan 

Federal loan consolidation programs offer several repayment options. Most borrowers opt for a standard repayment plan, equal payments every month, for ten years. If your lender allows it, and if your loan is big enough, you may also have the option to extend your payment plan to 12 years, or as many as 30 years. Some lenders also offer you a graduated repayment plan, where your payments are lower, then are raised a couple years later, and then raised again once or twice more over the life of your loan. The graduated plan is thought to help the student that will have an increase of earnings after a few years.

Step Four: Applying For Your Loan 

Once you have decided on a lender, and selected a payment plan, complete the loan application and attach all the paperwork. Once your loan is approved, your lender will pay off the existing loans and send you new statements.


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