Loan Consolidation Center

In the United States both the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP) include consolidation loans that allow students to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt. This results in reduced monthly repayments and a longer term for the loan. Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan.

Interest rates and payments

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.

History

The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).

In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs. In 2008, turmoil in the financial and credit markets has led to the suspension of many loan consolidation programs, including Sallie Mae, Nelnet and Next Student.

Consolidation loan lenders

Top consolidation lenders ranked by total FY 2006 consolidation loan originations

^{SOURCE: Stafford (FFEL & Direct) and PLUS (FFEL & Direct) Loans, from the National Student Loan Data System (NSLDS), US Department of Education, Fiscal Year 2006.}

References

1. ^ ^{a b} "GAO-06-195 Highlights, STUDENT CONSOLIDATION LOANS: Potential Effects of Making Fiscal Year 2006 Consolidation Loans Exclusively through the Direct Loan Program" (PDF). U.S. Government Accountability Office. 2005-12-01 . http://www.gao.gov/highlights/d06195high.pdf .  
2. ^ ^{a b} "Frequently Asked Questions About Consolidation Loans". Washington State University Office of Student Financial Aid. 2006-06-09 . http://www.finaid.wsu.edu/consolidloansFed.htm .  
3. ^ ^{a b c} Potier, Beth ( 2004-02-05 ). "Amid the hype, opportunity lurks for students with loans.". Harvard Gazette . http://www.news.harvard.edu/gazette/2004/02.05/11-studentloan.html .  
4. ^ "Types of Student Aid: Consolidation Loans". Student Guide 2001–2002 . United States Department of Education . http://www.ed.gov/prog_info/SFA/StudentGuide/2001-2/consoli.html .  

Further reading

• Teresa Boldt ( 2005-06-03 ) (PDF). FFELP Consolidation for Students Enrolled or In-Grace: A How-To Guide for Financial Aid Administrators . National Student Loan Program . http://www.nslp.org/pages/pdf/consolguide0605.pdf .  
• Burd, Stephen ( 2005-08-05 ). "House Committee Approves Bill to Extend Higher Education Act."". Chronicle of Higher Education . http://www.google.com/search?q=cache:Xpf4trGJlwMJ:chronicle.com/weekly/v51/i48/48a02102.htm+%22Federal+student+loan+consolidation%22&hl=en&ct=clnk&cd=168&gl=us .  
• "Federal Loan Consolidation". Pepperdine University School of Law. 2006 . http://law.pepperdine.edu/admissions/financial_aid/federal_loan_consolidation.html .  
• "Federal Loan Consolidation". Northwestern University Office of Undergraduate Financial Aid. 2006 . http://ug-finaid.northwestern.edu/consolidation.html .  

Direct Consolidation Loans - Welcome!!!

The Direct Consolidation Loans Web Site-this U.S. Department of Education web site provides information to borrowers, schools, and loan holders. Borrowers can apply online for ...

...

Student Loan Consolidation at Academic Lending Center, Federal Student ...

Student loan consolidation through the Academic Lending Center. Interest rates on this federal student loan consolidation program have never been lower! Consolidate your student ...

...

Direct Consolidation Loan - Borrower Services

You may be able to combine your existing Federal education loans into one new consolidated loan that offers several advantages. Click on “Borrower Info” topics to the left ...

...

School Loan Consolidation Directory Listings

Reviews (1) Rate It; Student Loan Consolidation Center. 1250 Hancock Street # 703, Quincy, MA 02169. phone

...

Student Loan Consolidation | StudentBenefitServices

SBS is a student loan consolidation center offering the best student loan consolidation rate.

...

Goal Financial, LLC - Loan Consolidation and Student Loan ...

Call the Student Loan Consolidation Center at 800-686-1248 to lock in a low fixed rate today! Benefits of the Federal Consolidation Loan

...

Loan Consolidation Center

Consolidating your student loans can help you and your parents simplify repaying your loans by allowing you to combine several types of federal student loans with various repayment ...

...

Student Loan Consolidation Center - Powered by Brazos

Looking for student loan consolidation? Try our consolidation calculator to see how you can consolidate your federal student loans into one low payment.

...

Loan Consolidation, Cancellation and Forgiveness

Loan Consolidation Center; Payment Problem and Loan Default Center ... Sometimes you need to change your loan arrangements. Here is where loan consolidation and cancellation ...

...

CollegiateFunding.com - College student loan center

Loan Consolidation Overview It is possible for you to consolidate any number of your existing Federal Student and Parent Plus loans, fixing a much lower interest ...

...