Benefits of consolidation:

• Can lock in your interest rate  
  • The interest rate effective 7/1/06 to 6/30/07 for loans disbursed between 7/1/98 and 6/30/06 is 6.54% for periods of in-school, grace or deferment.  The rate is 7.14% for periods of repayment or forbearance.  (Note:  interest rates for variable rate Stafford loans are determined every year by June 1 and are based on the 91-day T-Bill rate.  The new rates are effective from July 1 to June 30) 

• Note:  Older Stafford loans have different rates.  These interest rate charts show the rates in effect at the time of loan issue.

• For all Stafford loans disbursed after July 1, 2006 the interest rate will be 6.8%.  Stafford loans disbursed after 7/1/06 will keep the 6.8 rate for the life of the loan (i.e., they have a fixed interest rate).  Loans disbursed prior to 7/1/06 will continue to a variable rate unless they are consolidated at a fixed rate.

• Can bring multiple loans into 1 loan servicer
  • Ease of repayment and ease of filing deferment forms

     Consolidators offer various repayment incentives to lower repayment costs.   Ask each     consolidator for details regarding their borrower incentives.    

• Incentives are connected with:
• electronic auto pay (typically a 0.25% rate reduction)
• on-time repayment (typically an interest rate reduction or principal balance reduction for a set number of on-time payments offered by some Federal Consolidation lenders )

What happens to the interest subsidy when I consolidate if I qualify for deferment on my new consolidation loan?

Federal Subsidized Stafford loans consolidated in Federal or Direct Loan Consolidation maintain their interest subsidy as long as the borrower is in deferment on the new consolidation loan.  So, if you decide to consolidate your Stafford loans you would want to include both subsidized and unsubsidized loans on the consolidation application.

Federal Perkins loans are treated differently with regard to interest free status in Federal and Direct Loan Consolidation.  Perkins loans consolidated into Federal Consolidation are no longer interest free even if the borrower is in deferment on their Federal Consolidation Loan.  However, Perkins loans consolidated into Direct Loan Consolidation remain interest free as long as the borrower is in deferment on their Direct Consolidation Loan.

Please note that both Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDS) lose their interest free status when they are consolidated into either Federal or Direct Loan Consolidation, even if the new consolidation loan is in deferment.

What are the eligibility requirements?

You must be enrolled at least half-time at a school that participates in the Direct Loan Program, and you must meet general eligibility requirements for the Federal Student Aid (FSA) programs. You can find more information about these requirements in Funding Education Beyond High School: The Guide to Federal Student Aid or by contacting your school's financial aid office.

The amount students can borrow each year for subsidized and unsubsidized Stafford loans depends on their grade level and on whether they are dependent students or independent students.

The amount a student can borrow is also limited by the student's school costs, other financial aid the student may receive, and (in the case of subsidized loans) the student's expected family contribution.

These are the aggregate (total) limits for all subsidized and unsubsidized Stafford loans, whether solely from the Direct Loan Program or in combination with FFEL Stafford loans:

• $23,000 for a dependent undergraduate student
• $46,000 for an independent undergraduate student (no more than $23,000 may be subsidized)
• $138,500 for a graduate or professional student (no more than $65,000 may be subsidized; includes loans for undergraduate study)

With a PLUS loan, a graduate/professional student or the parent of a dependent student can borrow up to the cost of the student's education minus other financial aid the student receives.