Graduating from college is a huge accomplishment. We want to reward our graduating borrowers for making it through. We also make it a point to reward responsible borrowers and responsible repayment.
Apply with a creditworthy co-signer, and you may qualify for a lower rate
Take $300 off your principal loan amount when you graduate (with proof of graduation)
Get an immediate 0.25% rate discount just for signing up for automatic monthly payments
Make your first 48 consecutive payments on time, and you can request to release your co-signer (you’ll need to meet the loan credit requirements at the time of request)
Tuesday, October 27, 2009
Check out all the benefits that come with your NextStudent Private Loan
No FAFSA required
No application or origination fees — apply FREE
No payments due until after graduation†
Competitive interest rates and fees
Your interest only capitalizes once, not quarterly like with other lenders
Your check comes straight to YOU, not your school‡
No application or origination fees — apply FREE
No payments due until after graduation†
Competitive interest rates and fees
Your interest only capitalizes once, not quarterly like with other lenders
Your check comes straight to YOU, not your school‡
Get the money you need when your financial aid isn’t enough.
If your scholarships, grants, and federal student loans don’t cover the total cost of your education, you can still get the money you need for school. Our private student loans are available to undergrads and graduate students for tuition and fees, room and board, and your other education-related expenses: books, supplies, your trips home, even a laptop.
Cover up to 100% of your college costs.
Get the money you need for college or grad school. With a NextStudent Private Loan, you can cover up to 100% of your higher education expenses. Get from $3,000 up to $45,000* a year to pay for those college and grad school expenses that your scholarships and federal financial aid didn’t cover
Friday, October 23, 2009
Student Profile-Based Aid
International StudentsSources of financial aid and other useful information for foreign nationals studying in the US.
Canadian StudentsScholarships, loans and other sources of aid for Canadian students, in both Canada and the US.
Students with DisabilitiesResources specific to students with disabilities.
Female StudentsScholarships, grants and other awards intended specifically for female students.
Minority StudentsScholarships, award programs and advice specifically for members of ethnic minorities.
Older and Nontraditional StudentsFinancial aid information for students age 30 and older.
Jewish StudentsFinancial aid information for Jewish students.
Gay, Lesbian, Bisexual and Transgendered StudentsNational, regional and school-specific scholarships for gay, lesbian, bisexual and transgendered students.
Undocumented Students and Illegal AliensFinancial aid and scholarships for undocumented students and illegal aliens.
Ayuda Financiera del Estudiante en EspanolFinancial aid information and resources in Spanish.
Cancer ScholarshipsScholarships for cancer patients, cancer survivors, children of a cancer patient or survivor, students who lost a parent to cancer, and students pursuing careers in cancer treatment.
Prestigious Scholarships and FellowshipsA list of the most prestigious, competitive and lucrative scholarships and fellowships.
Canadian StudentsScholarships, loans and other sources of aid for Canadian students, in both Canada and the US.
Students with DisabilitiesResources specific to students with disabilities.
Female StudentsScholarships, grants and other awards intended specifically for female students.
Minority StudentsScholarships, award programs and advice specifically for members of ethnic minorities.
Older and Nontraditional StudentsFinancial aid information for students age 30 and older.
Jewish StudentsFinancial aid information for Jewish students.
Gay, Lesbian, Bisexual and Transgendered StudentsNational, regional and school-specific scholarships for gay, lesbian, bisexual and transgendered students.
Undocumented Students and Illegal AliensFinancial aid and scholarships for undocumented students and illegal aliens.
Ayuda Financiera del Estudiante en EspanolFinancial aid information and resources in Spanish.
Cancer ScholarshipsScholarships for cancer patients, cancer survivors, children of a cancer patient or survivor, students who lost a parent to cancer, and students pursuing careers in cancer treatment.
Prestigious Scholarships and FellowshipsA list of the most prestigious, competitive and lucrative scholarships and fellowships.
College-Controlled Aid
School Financial Aid Office Web SitesLook here for information about your school's financial aid policies and procedures, including application deadlines.
Tuition Payment PlansTuition payment plans are short-term installment plans that split your tuition into equal monthly payments.
School-Specific Scholarships and FellowshipsScholarship and fellowship programs offered only at specific schools, including college-controlled merit scholarships.
College PartnershipsPartnerships between certain community colleges and four-year colleges make it easier for students to transfer from a community college into a four-year college. Studying for two years at a community college can save the student a significant amount of money.
Tuition Payment PlansTuition payment plans are short-term installment plans that split your tuition into equal monthly payments.
School-Specific Scholarships and FellowshipsScholarship and fellowship programs offered only at specific schools, including college-controlled merit scholarships.
College PartnershipsPartnerships between certain community colleges and four-year colleges make it easier for students to transfer from a community college into a four-year college. Studying for two years at a community college can save the student a significant amount of money.
Federal and State Government Aid
US Federal Government AidHere you'll find information about the various forms of aid available from the federal government.
US State Government AidLook here for pointers to state aid programs and residency requirements for in-state tuition.
Section 529 Plans: Prepaid Tuition Plans and College Savings PlansSection 529 plans are state-sponsored college savings programs. The two major types are Prepaid Tuition Plans, which lock in current tuition rates, and State College Savings Plans, which offer more flexible investing options. Both are useful ways for families to save for their children's college education.
Scholarships for Volunteering and Community ServiceVolunteering can not only help the disadvantaged, but it can provide money for your college education. Learn about the National Service Scholarships Program, AmeriCorps, and other awards for community service.
Military AidAid resources for veterans and their dependents and for students interested in pursuing careers in the military.
Education Tax BenefitsInformation about the Hope Scholarship and Lifetime Learning tax credits, the deduction for student loan interest, tax treatment of employer education assistance, and other tax benefits for education.
Employer Tuition AssistanceInformation about employer education assistance, including the $5,250 exclusion from income, employer-sponsored scholarships and surveys and statistics concerning employer tuition assistance.
US State Government AidLook here for pointers to state aid programs and residency requirements for in-state tuition.
Section 529 Plans: Prepaid Tuition Plans and College Savings PlansSection 529 plans are state-sponsored college savings programs. The two major types are Prepaid Tuition Plans, which lock in current tuition rates, and State College Savings Plans, which offer more flexible investing options. Both are useful ways for families to save for their children's college education.
Scholarships for Volunteering and Community ServiceVolunteering can not only help the disadvantaged, but it can provide money for your college education. Learn about the National Service Scholarships Program, AmeriCorps, and other awards for community service.
Military AidAid resources for veterans and their dependents and for students interested in pursuing careers in the military.
Education Tax BenefitsInformation about the Hope Scholarship and Lifetime Learning tax credits, the deduction for student loan interest, tax treatment of employer education assistance, and other tax benefits for education.
Employer Tuition AssistanceInformation about employer education assistance, including the $5,250 exclusion from income, employer-sponsored scholarships and surveys and statistics concerning employer tuition assistance.
Tools for Evaluating Consolidation Options
Student Loan Consolidation
-->Consolidation Loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. It is very similar to refinancing a mortgage. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well.
A separate page provides a comparison chart of consolidation loan discounts.
Most FFELP lenders are no longer offering consolidation loans because these loans are no longer profitable. Students can still consolidate their loans with the US Department of Education's Federal Direct Loan Consolidation program at loanconsolidation.ed.gov even if their college does not participate in the Direct Loan Program.
Interest Rates
The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.
If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is
$5,000 * 5.0% + $10,000 * 6.8%
------------------------------ = 6.2%
$5,000 + $10,000
This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%.
Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%.
If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.
(For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate.
The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation.
If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.)
No Cost to Consolidate
Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate.
Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam.
Who Can Consolidate
Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.)
Married students are no longer able to consolidate their loans together. This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005.
Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.)
Parents, however, can consolidate PLUS loans at any time.
You Can Consolidate with Any Lender
Students and parents can consolidate their loans with any lender, even if all of their loans are with a single lender. (The single holder rule was repealed on June 15, 2006, as part of the Emergency Supplemental Appropriations Act of 2006. Borrowers no longer need to exploit the single holder rule loopholes in order to consolidate with any lender.) Direct Loans can also be consolidated with any lender. This allows you to shop around for a lender that offers a lower rate or better discounts.
Most lenders require a minimum balance before they will consolidate your loans. For example, many lenders will only offer consolidation loans for borrowers with loan balances of at least $7,500. A few lenders will offer consolidation loans for balances of $5,000 or more, and the Federal Direct Consolidation Loan program has no minimum balance for consolidation loans. (Lenders may not discriminate against borrowers who seek consolidation loans on the basis of number/type of student loans, type/category of educational institution, the interest rate on the loans, or the type of repayment schedule sought by the borrower. Lenders are, however, able to discriminate on the basis of the amount of the loans being consolidated, so lenders can set a minimum balance on the loans.)
Which Loans Can be Consolidated?
Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan.
You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself. These restrictions have been in effect since early 2006.
Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations.
The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation.
Repayment Plans
Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment.
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan. See our caveat about extended repayment below.
Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for an deferment or forbearance.
Federal education loans, including consolidation loans, do not have a prepayment penalty. So you can pay off all or part of your federal education loans without incurring a penalty. If you want to take advantage of this, be sure to include a letter with the extra payment indicating that it should be applied to reducing your principal. Otherwise, the lender may treat it as an advance payment of the next month's monthly payment.
Tools for Evaluating Consolidation Options
FinAid's Loan Consolidation Calculator can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan.
Despite the switch to fixed interest rates on Stafford and PLUS loans eliminating a key financial incentive to consolidate, there are still several reasons to consolidate your education loans. These include having a single monthly payment, access to alternate repayment plans, the PLUS loan interest rate loophole, and the ability to reset the 3-year clock on deferments and forbearances. But consolidation can cut short the grace period, although the grace period loophole can work around this problem. It is best to avoid consolidating Perkins loans, because you lose several valuable benefits. Beware of extending the term of your loan, as this can increase the total interest paid over the lifetime of the loan; you can stick with standard ten-year repayment.
Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount if you consolidate with another lender. It may be possible to get some of the benefits of alternate repayment plans without consolidating, such as extended/graduated repayment with a loan term of up to 25 years and a single monthly payment, if you have more than $30,000 in federal education loan debt accumulated since October 7, 1998 with the lender. (This is due to a little known provision of the Higher Education Act, in section 428(b)(9)(A)(iv), and the regulations at 34 CFR 682.209(a)(6)(ix).)
You can change the repayment schedule on your loan once per year. So consider starting off with standard ten-year repayment on your consolidation loan. You are not required to start off with extended repayment. If you find it difficult to afford the payments, you can always switch to extended repayment later.
-->Consolidation Loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. It is very similar to refinancing a mortgage. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well.
A separate page provides a comparison chart of consolidation loan discounts.
Most FFELP lenders are no longer offering consolidation loans because these loans are no longer profitable. Students can still consolidate their loans with the US Department of Education's Federal Direct Loan Consolidation program at loanconsolidation.ed.gov even if their college does not participate in the Direct Loan Program.
Interest Rates
The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.
If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is
$5,000 * 5.0% + $10,000 * 6.8%
------------------------------ = 6.2%
$5,000 + $10,000
This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%.
Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%.
If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.
(For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate.
The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation.
If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.)
No Cost to Consolidate
Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate.
Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam.
Who Can Consolidate
Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.)
Married students are no longer able to consolidate their loans together. This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005.
Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.)
Parents, however, can consolidate PLUS loans at any time.
You Can Consolidate with Any Lender
Students and parents can consolidate their loans with any lender, even if all of their loans are with a single lender. (The single holder rule was repealed on June 15, 2006, as part of the Emergency Supplemental Appropriations Act of 2006. Borrowers no longer need to exploit the single holder rule loopholes in order to consolidate with any lender.) Direct Loans can also be consolidated with any lender. This allows you to shop around for a lender that offers a lower rate or better discounts.
Most lenders require a minimum balance before they will consolidate your loans. For example, many lenders will only offer consolidation loans for borrowers with loan balances of at least $7,500. A few lenders will offer consolidation loans for balances of $5,000 or more, and the Federal Direct Consolidation Loan program has no minimum balance for consolidation loans. (Lenders may not discriminate against borrowers who seek consolidation loans on the basis of number/type of student loans, type/category of educational institution, the interest rate on the loans, or the type of repayment schedule sought by the borrower. Lenders are, however, able to discriminate on the basis of the amount of the loans being consolidated, so lenders can set a minimum balance on the loans.)
Which Loans Can be Consolidated?
Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan.
You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself. These restrictions have been in effect since early 2006.
Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations.
The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation.
Repayment Plans
Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment.
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan. See our caveat about extended repayment below.
Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for an deferment or forbearance.
Federal education loans, including consolidation loans, do not have a prepayment penalty. So you can pay off all or part of your federal education loans without incurring a penalty. If you want to take advantage of this, be sure to include a letter with the extra payment indicating that it should be applied to reducing your principal. Otherwise, the lender may treat it as an advance payment of the next month's monthly payment.
Tools for Evaluating Consolidation Options
FinAid's Loan Consolidation Calculator can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan.
Despite the switch to fixed interest rates on Stafford and PLUS loans eliminating a key financial incentive to consolidate, there are still several reasons to consolidate your education loans. These include having a single monthly payment, access to alternate repayment plans, the PLUS loan interest rate loophole, and the ability to reset the 3-year clock on deferments and forbearances. But consolidation can cut short the grace period, although the grace period loophole can work around this problem. It is best to avoid consolidating Perkins loans, because you lose several valuable benefits. Beware of extending the term of your loan, as this can increase the total interest paid over the lifetime of the loan; you can stick with standard ten-year repayment.
Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount if you consolidate with another lender. It may be possible to get some of the benefits of alternate repayment plans without consolidating, such as extended/graduated repayment with a loan term of up to 25 years and a single monthly payment, if you have more than $30,000 in federal education loan debt accumulated since October 7, 1998 with the lender. (This is due to a little known provision of the Higher Education Act, in section 428(b)(9)(A)(iv), and the regulations at 34 CFR 682.209(a)(6)(ix).)
You can change the repayment schedule on your loan once per year. So consider starting off with standard ten-year repayment on your consolidation loan. You are not required to start off with extended repayment. If you find it difficult to afford the payments, you can always switch to extended repayment later.
Repayment Plans
Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment.
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan. See our caveat about extended repayment below.
Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for an deferment or forbearance.
Federal education loans, including consolidation loans, do not have a prepayment penalty. So you can pay off all or part of your federal education loans without incurring a penalty. If you want to take advantage of this, be sure to include a letter with the extra payment indicating that it should be applied to reducing your principal. Otherwise, the lender may treat it as an advance payment of the next month's monthly payment.
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan. See our caveat about extended repayment below.
Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for an deferment or forbearance.
Federal education loans, including consolidation loans, do not have a prepayment penalty. So you can pay off all or part of your federal education loans without incurring a penalty. If you want to take advantage of this, be sure to include a letter with the extra payment indicating that it should be applied to reducing your principal. Otherwise, the lender may treat it as an advance payment of the next month's monthly payment.
Which Loans Can be Consolidated?
Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan.
You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself. These restrictions have been in effect since early 2006.
Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations.
The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation.
You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself. These restrictions have been in effect since early 2006.
Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations.
The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation.
You Can Consolidate with Any Lender
Students and parents can consolidate their loans with any lender, even if all of their loans are with a single lender. (The single holder rule was repealed on June 15, 2006, as part of the Emergency Supplemental Appropriations Act of 2006. Borrowers no longer need to exploit the single holder rule loopholes in order to consolidate with any lender.) Direct Loans can also be consolidated with any lender. This allows you to shop around for a lender that offers a lower rate or better discounts.
Most lenders require a minimum balance before they will consolidate your loans. For example, many lenders will only offer consolidation loans for borrowers with loan balances of at least $7,500. A few lenders will offer consolidation loans for balances of $5,000 or more, and the Federal Direct Consolidation Loan program has no minimum balance for consolidation loans. (Lenders may not discriminate against borrowers who seek consolidation loans on the basis of number/type of student loans, type/category of educational institution, the interest rate on the loans, or the type of repayment schedule sought by the borrower. Lenders are, however, able to discriminate on the basis of the amount of the loans being consolidated, so lenders can set a minimum balance on the loans.)
Most lenders require a minimum balance before they will consolidate your loans. For example, many lenders will only offer consolidation loans for borrowers with loan balances of at least $7,500. A few lenders will offer consolidation loans for balances of $5,000 or more, and the Federal Direct Consolidation Loan program has no minimum balance for consolidation loans. (Lenders may not discriminate against borrowers who seek consolidation loans on the basis of number/type of student loans, type/category of educational institution, the interest rate on the loans, or the type of repayment schedule sought by the borrower. Lenders are, however, able to discriminate on the basis of the amount of the loans being consolidated, so lenders can set a minimum balance on the loans.)
Who Can Consolidate
Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.)
Married students are no longer able to consolidate their loans together. This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005.
Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.)
Parents, however, can consolidate PLUS loans at any time
Married students are no longer able to consolidate their loans together. This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005.
Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.)
Parents, however, can consolidate PLUS loans at any time
No Cost to Consolidate
Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate.
Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam.
Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam.
Interest Rates
The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.
If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is
$5,000 * 5.0% + $10,000 * 6.8%
------------------------------ = 6.2%
$5,000 + $10,000
This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%.
Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%.
If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.
(For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate.
The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation.
If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.)
For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.
If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is
$5,000 * 5.0% + $10,000 * 6.8%
------------------------------ = 6.2%
$5,000 + $10,000
This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%.
Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%.
If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.
(For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate.
The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation.
If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.)
Wednesday, October 21, 2009
Why consolidate with us
Easy - we offer one-on-one personalized customer service. Our loan counselors can educate you on the benefits of school loan consolidation, and help you determine if consolidation is the right choice for you. We can explain the consolidation process, the different repayment options that are available, and of course all of the federal benefits that are tied into consolidating your school loans. Most importantly, we will be at your disposal throughout the entire process - from start to finish.
Use our student loan consolidation calculator and find your student loan savings!
Use our student loan consolidation calculator and find your student loan savings!
Student Loans
Few students can afford to pay for college without some form of education financing. Two-thirds (65.6%) of 4-year undergraduate students graduated with a Bachelor's degree and some debt in 2007-08, and the average student loan debt among graduating seniors was $23,186 (excluding PLUS Loans but including Stafford, Perkins, state, college and private loans). Among graduating 4-year undergraduate students who applied for federal student aid, 86.3% borrowed to pay for their education and the average cumulative debt was $24,651. (For just federal student loan debt, excluding PLUS Loans, the figures are 61.6% and $17,878.) Average cumulative debt increased by 5.6% or $1,139 a year since 2003-04. When one includes PLUS loans in the total, 66.0% of 4-year undergraduate students graduated with some debt in 2007-08, and the average cumulative debt incurred was $27,803. (About two in fifteen (13.5%) of parents borrow PLUS loans for their children's college education, with a cumulative PLUS loan debt of $23,298.)
These figures were calculated using the data analysis system for the 2007-2008 National Postsecondary Student Aid Study (NPSAS)conducted by the National Center for Education Statistics at the US Department of Education. (For comparison, cumulative education debt statistics from the 2003-2004 NPSAS are also available.) The 2007-2008 NPSAS surveyed 114,000 undergraduate students and 14,000 graduate and professional students. These statistics are not necessarily available from published NPSAS reports.
The median cumulative debt among graduating Bachelor's degree recipients at 4-year undergraduate schools was $19,999 in 2007-08. One quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more. 9.5% of undergraduate students and 14.6% of undergraduate student borrowers graduating with a Bachelor's degree graduated with $40,000 or more in cumulative debt in 2007-08. This compares with 6.4% and 10.0%, respectively, for Bachelor's degree recipients graduating with $40,000 or more (2008 dollars) in cumulative debt in 2003-04.
The following table shows the percentage of students borrowing and average cumulative debt per borrower (excluding PLUS Loans) at graduation according to type of educational institution but not restricted by degree program.
Undergraduate Education Debt
Institution Level & Control
Percent Borrowing
Cumulative Debt
Overall Total (4, 2 and < 2 year)
58.8%
$18,625
Public
49.4%
$16,369
Private Non-Profit
69.7%
$26,683
Private For-Profit
93.1%
$17,162
4-year Total
66.5%
$22,656
4-year Public
61.1%
$19,839
4-year Private Non-Profit
70.6%
$27,349
4-year Private For-Profit
97.0%
$24,635
2-year Total
44.8%
$12,307
2-year Public
37.2%
$10,444
2-year Private Non-Profit
64.0%
$14,790
2-year Private For-Profit
97.6%
$17,310
< 2-year Total
74.7%
$10,172
< 2-year Public
36.1%
$10,321
< 2-year Private Non-Profit
45.0%
$10,990
< 2-year Private For-Profit
86.0%
$10,123
Graduate and professional students borrow even more, with the additional cumulative debt for a graduate degree typically ranging from $30,000 to $120,000. The median additional debt is $25,000 for a Master's degree, $52,000 for a doctoral degree and $79,836 for a professional degree. A quarter of graduate and professional students borrow more than $42,898 for a Master's degree, more than $75,712 for a doctoral degree and more than $118,500 for a professional degree. At the 90th percentile cumulative debt for graduate and professional degrees exceeds $59,869 for a Master's degree, $123,650 for a doctoral degree and $159,750 for a professional degree.
These figures were calculated using the data analysis system for the 2007-2008 National Postsecondary Student Aid Study (NPSAS)conducted by the National Center for Education Statistics at the US Department of Education. (For comparison, cumulative education debt statistics from the 2003-2004 NPSAS are also available.) The 2007-2008 NPSAS surveyed 114,000 undergraduate students and 14,000 graduate and professional students. These statistics are not necessarily available from published NPSAS reports.
The median cumulative debt among graduating Bachelor's degree recipients at 4-year undergraduate schools was $19,999 in 2007-08. One quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more. 9.5% of undergraduate students and 14.6% of undergraduate student borrowers graduating with a Bachelor's degree graduated with $40,000 or more in cumulative debt in 2007-08. This compares with 6.4% and 10.0%, respectively, for Bachelor's degree recipients graduating with $40,000 or more (2008 dollars) in cumulative debt in 2003-04.
The following table shows the percentage of students borrowing and average cumulative debt per borrower (excluding PLUS Loans) at graduation according to type of educational institution but not restricted by degree program.
Undergraduate Education Debt
Institution Level & Control
Percent Borrowing
Cumulative Debt
Overall Total (4, 2 and < 2 year)
58.8%
$18,625
Public
49.4%
$16,369
Private Non-Profit
69.7%
$26,683
Private For-Profit
93.1%
$17,162
4-year Total
66.5%
$22,656
4-year Public
61.1%
$19,839
4-year Private Non-Profit
70.6%
$27,349
4-year Private For-Profit
97.0%
$24,635
2-year Total
44.8%
$12,307
2-year Public
37.2%
$10,444
2-year Private Non-Profit
64.0%
$14,790
2-year Private For-Profit
97.6%
$17,310
< 2-year Total
74.7%
$10,172
< 2-year Public
36.1%
$10,321
< 2-year Private Non-Profit
45.0%
$10,990
< 2-year Private For-Profit
86.0%
$10,123
Graduate and professional students borrow even more, with the additional cumulative debt for a graduate degree typically ranging from $30,000 to $120,000. The median additional debt is $25,000 for a Master's degree, $52,000 for a doctoral degree and $79,836 for a professional degree. A quarter of graduate and professional students borrow more than $42,898 for a Master's degree, more than $75,712 for a doctoral degree and more than $118,500 for a professional degree. At the 90th percentile cumulative debt for graduate and professional degrees exceeds $59,869 for a Master's degree, $123,650 for a doctoral degree and $159,750 for a professional degree.
Saving for College
According to the Bureau of Labor Statistics, the tuition component of the Consumer Price Index (CPI) increased by 8% per year, on average, from 1979 to 2001. This means that children born today will face college costs that are 3 to 4 times current prices by the time they matriculate.
Parents should expect to pay at least half to two-thirds of their children's college costs through a combination of savings, current income, and loans. Gift aid from the government, the colleges and universities, and private scholarships accounts for only about a third of total college costs.
Accordingly, it is very important that parents start saving for their children's education as soon as possible, even as early as the day the child is born. Time is one of your most valuable assets. The sooner you start saving for college, the more time your money will have to grow.
September isNational College Savings Month!
If you start saving early enough, even a modest weekly or monthly investment can grow to a significant college fund by the time the child matriculates. For example, saving $50 a month from birth would yield about $20,000 by the time the child turns 17, assuming a 7% return on investment. Saving $200 a month would yield almost $80,000.
It is less expensive to save for college than to borrow. Either way, you're setting aside a portion of your income to pay for college. But when you save, the money earns interest, while when you borrow, you're paying the interest. Paying for college before your child matriculates definitely costs much less than paying for college afterward. Saving $200 a month for ten years at 7% interest would yield $34,818.89. Borrowing the same amount at 6.8% interest with a ten year term would require payments of $400.70 a month. At 8.5% interest the payments increase to $431.70 a month. (If your return on investment is 4% instead of 7%, you'd accumulate $29,548.13. Borrowing this amount at 6.8% interest would entail monthly payments of $340.04; at 8.5% interest the monthly payments would be $366.35. If your return on investment is 10%, you'd accumulate $41,310.40, corresponding to monthly payments of $475.40 at 6.8% and $512.19 at 8.5%.) So if you elect to borrow instead of saving, you will be paying 1.7 to 2.6 times as much per month.
Tuesday, October 6, 2009
Options for Medical Professionals
- Doctors who practice in an area suffering a clinician shortage may qualify for loan forgiveness.
- Doctors and nurses who want to contribute to an underserved area should consult the National Health Service Corps's list of opportunities.
- Doctors performing medical research in particular areas (AIDS research, for example, some pediatric research, some infertility research, etc.) also can qualify for loan forgiveness.
- Nurses who provide two years of service in a critical shortage facility are eligible for 60% loan forgiveness. Nurses may be able to work a third year for additional reductions in loans.
Will Loan Forgiveness Benefit You?
- Loan forgiveness is a great way to give back to the public good while the government pays back your student loans. But it isn't for everyone.
- Remember that loan forgiveness will not necessarily cancel your entire loan. It isn't a get out of jail free card. Different programs offer different amounts of loan forgiveness, so read the fine print carefully.
- Doing community service work in an impoverished West African village or teaching in an overcrowded school with few resources isn't easy. If you hadn't already thought seriously about doing the kind of work that does offer loan forgiveness, you shouldn't switch course just to pay off your debt.
- If, however, you aren't sure exactly what you want to do next, a stint in Americorps or the Peace Corps could be an excellent opportunity for you.
- If reducing student loan debt is your only motivation for seeking out loan forgiveness, you might want to consider your other options first: switching your repayment plan or consolidating student loans(grouping them together under one fixed rate) to lower your monthly payment.
- Also see Mahalo's guide to How to Reduce Student Loan Debt to assess all your options for surviving your student loans.
- And remember that almost no loan forgiveness program we've seen will accept you if you are indefault on your loans, meaning you haven't paid in over 180 days.
Consolidate Your Private Loans
It is possible to consolidate private loans, as well, and this may be worth doing if your credit score is higher now than it was when you took out the loan.
You may be able to consolidate your loan with your original lender. It might be best to start there to see what rates may be available to you.
If your lender is not offering a consolidation rate that is appealing, you'll need to comparison shop to find the best consolidation offer.
Note that private consolidation loans are based on your credit score, and/or that of your co-signor's. You may get a lower rate if you apply to consolidate with a co-signor who has excellent credit.
Be sure to research any associated fees before you determine that it is financially advantageous to consolidate your private loans.
You may be able to consolidate your loan with your original lender. It might be best to start there to see what rates may be available to you.
If your lender is not offering a consolidation rate that is appealing, you'll need to comparison shop to find the best consolidation offer.
Note that private consolidation loans are based on your credit score, and/or that of your co-signor's. You may get a lower rate if you apply to consolidate with a co-signor who has excellent credit.
Be sure to research any associated fees before you determine that it is financially advantageous to consolidate your private loans.
Monday, May 11, 2009
1) Computer Lab Assistant (on-campus)
Typical Hourly Pay: $8–$11
Good news for computer geeks: If you know your way around basic hardware and applications, you’re comfortable with printer hookups and toner changes, and you’ve got a knack for troubleshooting, you may be able to land a gig at your campus computer lab helping your fellow students. The better your tech skills, the higher your pay will usually be. And as long as everything’s running smoothly, you’ll generally have a lot of downtime to get some studying done while you’re on the clock.
Computer Support Specialist (off-campus)
Average Hourly Pay: $21.78
If you’re really a computer whiz and can talk people through most hardware or app problems, consider looking for an off-campus job as a computer support specialist, answering customers’ questions about things like e-mail, installation, and printing. Average pay for these positions last year was an impressive $21.78 an hour.
Good news for computer geeks: If you know your way around basic hardware and applications, you’re comfortable with printer hookups and toner changes, and you’ve got a knack for troubleshooting, you may be able to land a gig at your campus computer lab helping your fellow students. The better your tech skills, the higher your pay will usually be. And as long as everything’s running smoothly, you’ll generally have a lot of downtime to get some studying done while you’re on the clock.
Computer Support Specialist (off-campus)
Average Hourly Pay: $21.78
If you’re really a computer whiz and can talk people through most hardware or app problems, consider looking for an off-campus job as a computer support specialist, answering customers’ questions about things like e-mail, installation, and printing. Average pay for these positions last year was an impressive $21.78 an hour.
2) Administrative / Personal Assistant (on- or off-campus)
Average Hourly Pay: $19.57
The work may not sound glamorous, but administrative assistants have some of the highest-paid hourly jobs out there. Execs and entrepreneurs frequently pay good money for reliable, trustworthy part-time talent to help them with their busy lives. As a personal assistant, you’ll need to be flexible, accommodating, and ready for anything: You might be in an office, making travel arrangements, helping with paperwork, or you might be out and about, running errands, dropping off dry-cleaning, picking up lunch, and pet-sitting.
On campus, deans and department heads often need an executive or administrative assistant to help with preparing reports, scheduling meetings, arranging conference calls, and various clerical and reception duties. Look for admin job listings at your school’s career center, in you campus paper classifieds, and on job sites like Craigslist, CareerBuilder, and Monster.
The work may not sound glamorous, but administrative assistants have some of the highest-paid hourly jobs out there. Execs and entrepreneurs frequently pay good money for reliable, trustworthy part-time talent to help them with their busy lives. As a personal assistant, you’ll need to be flexible, accommodating, and ready for anything: You might be in an office, making travel arrangements, helping with paperwork, or you might be out and about, running errands, dropping off dry-cleaning, picking up lunch, and pet-sitting.
On campus, deans and department heads often need an executive or administrative assistant to help with preparing reports, scheduling meetings, arranging conference calls, and various clerical and reception duties. Look for admin job listings at your school’s career center, in you campus paper classifieds, and on job sites like Craigslist, CareerBuilder, and Monster.
3) Aerobic Instructor / Fitness Trainer (off-campus)
Average Hourly Pay: $15.86
If you’re a workout junkie who’s spending hours in the gym anyway, why not make some good money while you’re at it? Put your workout ethic to use at your campus rec center or at a local gym, and help other people get healthy and in shape.
If you’re a workout junkie who’s spending hours in the gym anyway, why not make some good money while you’re at it? Put your workout ethic to use at your campus rec center or at a local gym, and help other people get healthy and in shape.
4) College Mail / Print Center Attendant (on-campus)
Average Hourly Pay: $12–$13
On-campus centers that feature printing, copying, binding, and mailing services are generally found at larger schools. Off-campus, you can find a similar job at places like Kinko’s and AlphaGraphics. Last year, mail clerks earned an average of $12.32 an hour, and so-called “office machine operators” (employees running photocopiers, printers, etc.) made an average hourly wage of $12.85. As an added perk, you may be able to get a discount on those costly print jobs for your large end-of-semester projects.
On-campus centers that feature printing, copying, binding, and mailing services are generally found at larger schools. Off-campus, you can find a similar job at places like Kinko’s and AlphaGraphics. Last year, mail clerks earned an average of $12.32 an hour, and so-called “office machine operators” (employees running photocopiers, printers, etc.) made an average hourly wage of $12.85. As an added perk, you may be able to get a discount on those costly print jobs for your large end-of-semester projects.
5) Library Assistant (on- or off-campus)
Average Hourly Pay: $11.42
Sort and shelve books, periodicals, and other materials, and help visitors check out books and operate audio/visual systems, computers, and copiers. This is another job that could give you a good deal of free time to study. The catch is your campus library will probably keep you busiest around midterms and finals, when you’d need the study time most. If your campus library isn’t hiring, try your local public libraries.
Sort and shelve books, periodicals, and other materials, and help visitors check out books and operate audio/visual systems, computers, and copiers. This is another job that could give you a good deal of free time to study. The catch is your campus library will probably keep you busiest around midterms and finals, when you’d need the study time most. If your campus library isn’t hiring, try your local public libraries.
6) Bank Teller (off-campus)
Average Hourly Pay: $11.36
About one in four bank tellers work part-time, and although most teller jobs don’t require a college degree, if you’re a finance or accounting major, getting started as a teller now could help pave your way to a higher-level job in the banking or finance industry after graduation. If your school happens to have a campus branch of a national or local bank, you may even be able to score a teller job right there on campus
About one in four bank tellers work part-time, and although most teller jobs don’t require a college degree, if you’re a finance or accounting major, getting started as a teller now could help pave your way to a higher-level job in the banking or finance industry after graduation. If your school happens to have a campus branch of a national or local bank, you may even be able to score a teller job right there on campus
7) Desk Attendant (on-campus)
Typical Hourly Pay: $8–$10
With many colleges upping campus security in recent years, schools all over the country are hiring student attendants to monitor those entering and exiting dorms and other campus buildings. If you’re used to pulling all-nighters on a regular basis, the nightshift could be perfect for you: With low foot-traffic in the middle of the night, you’ll have a lot of time to study while earning a paycheck.
Hotel Desk Clerk (off-campus)
Average Hourly Pay: $9.66
Do the job of a desk attendant off-campus and gain some valuable experience for your résumé. If you’re eyeing a career in the hospitality industry, starting as a hotel desk clerk can be a great way to get your foot in the door. The downside is you’ll typically be busier than a campus desk attendant, so you may not have as much time to study, and your manager may not want you absorbed in your econ homework when you’re supposed to be welcoming guests with a smile.
With many colleges upping campus security in recent years, schools all over the country are hiring student attendants to monitor those entering and exiting dorms and other campus buildings. If you’re used to pulling all-nighters on a regular basis, the nightshift could be perfect for you: With low foot-traffic in the middle of the night, you’ll have a lot of time to study while earning a paycheck.
Hotel Desk Clerk (off-campus)
Average Hourly Pay: $9.66
Do the job of a desk attendant off-campus and gain some valuable experience for your résumé. If you’re eyeing a career in the hospitality industry, starting as a hotel desk clerk can be a great way to get your foot in the door. The downside is you’ll typically be busier than a campus desk attendant, so you may not have as much time to study, and your manager may not want you absorbed in your econ homework when you’re supposed to be welcoming guests with a smile.
8) Babysitter (on- and off-campus)
Average Hourly Pay: $9.21 for five to nine years’ experience; $7.17 for one to four years’ experience (according to PayScale.com)
Though this job may not pay as well as other on- or off-campus jobs, you’ll usually have plenty of work, especially if you’re dependable and can build a strong customer base off word-of-mouth referrals. Start with your campus newspaper — nearby parents and professors with kids will often advertise here, and the pay can run higher, between $10 and $15 an hour. You can also try Craigslist and community bulletin boards to find off-campus families looking for babysitting services. Get night sitting gigs, and you’ll have plenty of time to study and do homework after the kids go to sleep — assuming, of course, you’re good enough at your job that once you put the kids to bed, you can get them to stay there.
Though this job may not pay as well as other on- or off-campus jobs, you’ll usually have plenty of work, especially if you’re dependable and can build a strong customer base off word-of-mouth referrals. Start with your campus newspaper — nearby parents and professors with kids will often advertise here, and the pay can run higher, between $10 and $15 an hour. You can also try Craigslist and community bulletin boards to find off-campus families looking for babysitting services. Get night sitting gigs, and you’ll have plenty of time to study and do homework after the kids go to sleep — assuming, of course, you’re good enough at your job that once you put the kids to bed, you can get them to stay there.
How much can you save each month
How much can you save each month?
If you consolidate student loans right now, you could save hundreds of dollars a month. Here's a quick chart showing how much you could save on your monthly payments:
Total Loans Current Payment After Consolidation Monthly Savings
$30,000.00 $342.48 $227.22 $115.26!
$40,000.00 $456.64 $275.10 $181.53!
$50,000.00 $570.80 $343.88 $226.92!
$75,000.00 $856.20 $483.96 $372.24!
$100,000.00 $1,141.59 $645.28 $496.32!
Click Here to Consolidate Student Loans! Calculate Your Savings!
Savings shown are based on the current Stafford Loan interest rate of 6.8%; borrowers in grace periods, with student loans other than Stafford (i.e. PLUS or Perkins loans), or with Stafford Loans older than July 1, 1998, will have different interest rates.
Student Loan Consolidation Blog Which benefits are attached to Private Consolidation?
May 8 2009 - The quick answer is check with your consolidating lender as benefits vary, but generally speaking there is a wide array of potential benefits that come equipped with private student loans...
Consolidation Benefits Gone
May 8 2009 - The borrower benefits that once existed in the world of consolidation are now gone. It’s as if Back to the Future’s resident tough guy Biff Tannen told them to make...
Subscribe in a reader Student Loan Consolidation is a service of the Student Loan Network, an Edvisors Online Education company.
© 2009 Edvisors. All rights reserved. 1250 Hancock Street, Suite 703N, Quincy, MA 02169
Online Schools | Student Credit Cards | Private Student Loans | Privacy Policy | Site Map | Advertise
If you consolidate student loans right now, you could save hundreds of dollars a month. Here's a quick chart showing how much you could save on your monthly payments:
Total Loans Current Payment After Consolidation Monthly Savings
$30,000.00 $342.48 $227.22 $115.26!
$40,000.00 $456.64 $275.10 $181.53!
$50,000.00 $570.80 $343.88 $226.92!
$75,000.00 $856.20 $483.96 $372.24!
$100,000.00 $1,141.59 $645.28 $496.32!
Click Here to Consolidate Student Loans! Calculate Your Savings!
Savings shown are based on the current Stafford Loan interest rate of 6.8%; borrowers in grace periods, with student loans other than Stafford (i.e. PLUS or Perkins loans), or with Stafford Loans older than July 1, 1998, will have different interest rates.
Student Loan Consolidation Blog Which benefits are attached to Private Consolidation?
May 8 2009 - The quick answer is check with your consolidating lender as benefits vary, but generally speaking there is a wide array of potential benefits that come equipped with private student loans...
Consolidation Benefits Gone
May 8 2009 - The borrower benefits that once existed in the world of consolidation are now gone. It’s as if Back to the Future’s resident tough guy Biff Tannen told them to make...
Subscribe in a reader Student Loan Consolidation is a service of the Student Loan Network, an Edvisors Online Education company.
© 2009 Edvisors. All rights reserved. 1250 Hancock Street, Suite 703N, Quincy, MA 02169
Online Schools | Student Credit Cards | Private Student Loans | Privacy Policy | Site Map | Advertise
College Partnerships
Partnerships between certain community colleges and four-year colleges make it easier for students to transfer from a community college into a four-year college. Studying for two years at a community college can save the student a significant amount of money.
Student Profile-Based Aid
Student Profile-Based Aid
Student Sponsorships and Education Investments
Private benefactors and investors provide students with funding for their education in exchange for a fixed percentage of the student's future income for a fixed number of years. Many students find these as an attractive alternative to loans.
Early Awareness Initiatives
Early awareness initiatives try to increase the number of students pursuing a college education by encouraging them to consider college as a real possibility when they are young. Many lower-income children give up on college when they are very young, as early as the first or second grade. By the time they reach high school and change their minds, they often lack the necessary preparation. Early awareness programs try to stop pipeline leakage when the students are young by encouraging them to aspire to and plan for college. This increases the number of students pursuing challenging courses, the number of students graduating from high school, and the number of students matriculating in college.
Scholarships
Undergraduate scholarships and graduate fellowships are forms of aid that help students pay for their education. Unlike student loans, scholarships and fellowships do not have to be repaid. Hundreds of thousands of scholarships and fellowships from several thousand sponsors are awarded each year.
Best Ways to Find Money
1. FastWeb Scholarship Search
2. Local Public Library
3. Local College's Aid Office
Generally, scholarships and fellowships are reserved for students with special qualifications, such as academic, athletic or artistic talent. Awards are also available for students who are interested in particular fields of study, who are members of underrepresented groups, who live in certain areas of the country or who demonstrate financial need.
The best way to search for scholarships and fellowships is to use a personalized search, like the FastWeb scholarship search, that compares your background with a database of awards. Only those awards that fit your profile are identified as matches.
There are several free scholarship databases available online. With more than 1.5 million scholarships worth more than $3.4 billion, the FastWeb scholarship search is the largest, most accurate and most frequently updated scholarship database. If you supply an email address, they will notify you when new awards that match your profile are added to the database. You can even submit an electronic application to some of the scholarships listed in the FastWeb scholarship database, saving you time and money. FastWeb also includes a college search and numerous other student resources.
November is
National
Scholarship
Month!
In addition to the FastWeb scholarship search, you may want to search one of the other free scholarship search sites. It doesn't take much time to search and it's free. To find small local awards that aren't listed in any book or database, look for notices posted on bulletin boards at your school's guidance office, the public library and outside the financial aid office at nearby colleges and universities.
You can also search for scholarships using your favorite web search engine by including the word "scholarships" with your search keywords.
College alumni and other private scholarship sponsors occasionally establish scholarships with esoteric eligibility requirements, such as a scholarship for left-handed students. Although there aren't many of these unusual scholarships, they often attract a lot of attention because of their slightly offbeat nature.
The most prestigious scholarships and fellowships also attract a lot of attention because they are among the most lucrative and competitive awards. Many colleges also offer full tuition academic scholarships.
Average students often ask whether there are any scholarships available to students who don't have a 4.0 GPA. There are many scholarships for average students that focus on qualities besides academic merit. There are also many community service scholarships.
Most scholarship search sites do not allow children under age 13 to register because of the Children's Online Privacy Protection Act (COPPA). Unfortunately, this prevents parents from finding out about scholarships for students under age 13. FinAid has compiled a comprehensive list of college scholarships for students under age 13 and in grades K-8.
Don't waste your money on fee-based scholarship matching services. You won't get any better information than you can get from the free services available on the Web.
Once you've identified the scholarships for which you are eligible, FinAid has many good suggestions on how to maximize your chances of winning a scholarship.
Scholarships that sound too good to be true usually are. Learn how to recognize and protect yourself from the most common scholarship scams. The number one tip: If you have to pay money to get money, it's probably a scam.
It is important to ask the school's financial aid office about its outside scholarship policy, since this can affect how much you benefit from winning a scholarship if you are receiving need-based student aid.
A portion of your scholarship might be taxable. Usually amounts used for tuition and required fees are tax-free, but you should review the rules to ensure that you report the scholarship correctly.
The most reliable information about the number and amount of scholarships can be found in the National Postsecondary Student Aid Study (NPSAS), a statistically representative survey of undergraduate and graduate students conducted by the National Center for Education Statistics (NCES) at the US Department of Education. FinAid also presents an analysis of the number of scholarships in the major scholarship databases, reporting the precision and recall of each database.
Students who are awarded scholarships often need additional financial assistance. See the Loans section for information on student and parent loans. To find out about contest, grants and other aid options, visit the section discussing Other Types of Aid. The Other Types of Aid section also provides information about scholarships for students with specific interests or abilities.
Businesses and philanthropists who are thinking about sponsoring a new scholarship may find the Scholarship Design & Management section helpful.
Best Ways to Find Money
1. FastWeb Scholarship Search
2. Local Public Library
3. Local College's Aid Office
Generally, scholarships and fellowships are reserved for students with special qualifications, such as academic, athletic or artistic talent. Awards are also available for students who are interested in particular fields of study, who are members of underrepresented groups, who live in certain areas of the country or who demonstrate financial need.
The best way to search for scholarships and fellowships is to use a personalized search, like the FastWeb scholarship search, that compares your background with a database of awards. Only those awards that fit your profile are identified as matches.
There are several free scholarship databases available online. With more than 1.5 million scholarships worth more than $3.4 billion, the FastWeb scholarship search is the largest, most accurate and most frequently updated scholarship database. If you supply an email address, they will notify you when new awards that match your profile are added to the database. You can even submit an electronic application to some of the scholarships listed in the FastWeb scholarship database, saving you time and money. FastWeb also includes a college search and numerous other student resources.
November is
National
Scholarship
Month!
In addition to the FastWeb scholarship search, you may want to search one of the other free scholarship search sites. It doesn't take much time to search and it's free. To find small local awards that aren't listed in any book or database, look for notices posted on bulletin boards at your school's guidance office, the public library and outside the financial aid office at nearby colleges and universities.
You can also search for scholarships using your favorite web search engine by including the word "scholarships" with your search keywords.
College alumni and other private scholarship sponsors occasionally establish scholarships with esoteric eligibility requirements, such as a scholarship for left-handed students. Although there aren't many of these unusual scholarships, they often attract a lot of attention because of their slightly offbeat nature.
The most prestigious scholarships and fellowships also attract a lot of attention because they are among the most lucrative and competitive awards. Many colleges also offer full tuition academic scholarships.
Average students often ask whether there are any scholarships available to students who don't have a 4.0 GPA. There are many scholarships for average students that focus on qualities besides academic merit. There are also many community service scholarships.
Most scholarship search sites do not allow children under age 13 to register because of the Children's Online Privacy Protection Act (COPPA). Unfortunately, this prevents parents from finding out about scholarships for students under age 13. FinAid has compiled a comprehensive list of college scholarships for students under age 13 and in grades K-8.
Don't waste your money on fee-based scholarship matching services. You won't get any better information than you can get from the free services available on the Web.
Once you've identified the scholarships for which you are eligible, FinAid has many good suggestions on how to maximize your chances of winning a scholarship.
Scholarships that sound too good to be true usually are. Learn how to recognize and protect yourself from the most common scholarship scams. The number one tip: If you have to pay money to get money, it's probably a scam.
It is important to ask the school's financial aid office about its outside scholarship policy, since this can affect how much you benefit from winning a scholarship if you are receiving need-based student aid.
A portion of your scholarship might be taxable. Usually amounts used for tuition and required fees are tax-free, but you should review the rules to ensure that you report the scholarship correctly.
The most reliable information about the number and amount of scholarships can be found in the National Postsecondary Student Aid Study (NPSAS), a statistically representative survey of undergraduate and graduate students conducted by the National Center for Education Statistics (NCES) at the US Department of Education. FinAid also presents an analysis of the number of scholarships in the major scholarship databases, reporting the precision and recall of each database.
Students who are awarded scholarships often need additional financial assistance. See the Loans section for information on student and parent loans. To find out about contest, grants and other aid options, visit the section discussing Other Types of Aid. The Other Types of Aid section also provides information about scholarships for students with specific interests or abilities.
Businesses and philanthropists who are thinking about sponsoring a new scholarship may find the Scholarship Design & Management section helpful.
Thursday, April 23, 2009
Student Loan consolidation
Loan consolidation is the channel through which you can bring all your loans under one single policy and reduce the monthly payments by increasing the duration of the loan. Consolidation has loads of benefits, some being:
Lower rate of interest
Locking in loans at a lower interest rate
Lower monthly payments
Worrying about just one loan instead of many
Longer repayment schedule Bear in mind that we are talking specifically about student loans. There is consolidation available from other type of loans too, but at EdFed we deal with only your student loans. The logic behind consolidation is simple. consolidation merges all your loans and bills into one single payment. It reduces your (the borrower's) monthly bill of loan repayment. In simpler terms, think of it this way: If you have to pay $100 in 5 years, you pay $20 every year (ignoring any interest component), and if you have to pay the same $100 in 10 years, you pay $10 every year. And in certain cases, the monthly payment burden gets reduced, and the loan payment period also doesn't get increased. This is what consolidation does; it reduces your monthly expenditure on loan repayment and gives you that extra cash in hand. Now to tell you a little bit more about the Student Consolidation Program. If your loan is eligible to be consolidated under this program (see the list below) then you don't have to worry about variable interest rates anymore. Under the Student Consolidation Program, the interest rates are fixed based on many technicalities such as the amount of loan outstanding, the interest rate currently paid, etc. This rate of interest would be fixed throughout the life of your loan. So no more watching the interest rate markets for fluctuations that can hamper your lifestyle.
The list of loans that can be consolidated under the Student Consolidation Program:
Unsubsidized Federal Stafford Loans
Federal Parent Loans for Undergraduate Students (PLUS)
Federal Supplemental Loans for Students (SLS)
National Direct Student Loans (NDSL)
Health Professions Student Loans
Federal Perkins Loans
Subsidized Federal Stafford Loans
All Federal Direct Student Loans (Direct Loans)
Health Education Assistance Loans (HEAL)
Nursing Student Loans
Student Consolidation Loans
Federally Insured Student Loans (FISL)
Loan from the Department of Education
Further Reading
+Consolidating Debt+Consolidation Can Ease Your Debt+EdFed Savings+How Consolidation Can Ease the Social Stigma of Debt+Special Student Report: What You Need to Know About Student Loan Consolidation+Students Who Wait to Consolidate May Miss Out+The Benefits of Federal Loan Consolidation+Why Does the Federal Government Want to Help You?
read similar articles
-->If your loan falls under any of the above, then loan consolidation is a realistic option for you. Irrespective of whether you are still a student or you have graduated, you can consolidate with EdFed and ensure lower interest rates and better terms. At EdFed, we reduce your loan burdens. We offer you the following terms:
Lock in low interest rates.
No credit checks, No fees - Absolutely Free!
Loan period extendable to up to 30 years
Lower monthly payments by nearly 50%
Complete confidentiality maintained
Free live pre-qualification by government-approved agents
It's a U.S. Government Program
And it takes just 60 Seconds to Qualify! Click here to Qualify for a consolidation now. -->
Lower rate of interest
Locking in loans at a lower interest rate
Lower monthly payments
Worrying about just one loan instead of many
Longer repayment schedule Bear in mind that we are talking specifically about student loans. There is consolidation available from other type of loans too, but at EdFed we deal with only your student loans. The logic behind consolidation is simple. consolidation merges all your loans and bills into one single payment. It reduces your (the borrower's) monthly bill of loan repayment. In simpler terms, think of it this way: If you have to pay $100 in 5 years, you pay $20 every year (ignoring any interest component), and if you have to pay the same $100 in 10 years, you pay $10 every year. And in certain cases, the monthly payment burden gets reduced, and the loan payment period also doesn't get increased. This is what consolidation does; it reduces your monthly expenditure on loan repayment and gives you that extra cash in hand. Now to tell you a little bit more about the Student Consolidation Program. If your loan is eligible to be consolidated under this program (see the list below) then you don't have to worry about variable interest rates anymore. Under the Student Consolidation Program, the interest rates are fixed based on many technicalities such as the amount of loan outstanding, the interest rate currently paid, etc. This rate of interest would be fixed throughout the life of your loan. So no more watching the interest rate markets for fluctuations that can hamper your lifestyle.
The list of loans that can be consolidated under the Student Consolidation Program:
Unsubsidized Federal Stafford Loans
Federal Parent Loans for Undergraduate Students (PLUS)
Federal Supplemental Loans for Students (SLS)
National Direct Student Loans (NDSL)
Health Professions Student Loans
Federal Perkins Loans
Subsidized Federal Stafford Loans
All Federal Direct Student Loans (Direct Loans)
Health Education Assistance Loans (HEAL)
Nursing Student Loans
Student Consolidation Loans
Federally Insured Student Loans (FISL)
Loan from the Department of Education
Further Reading
+Consolidating Debt+Consolidation Can Ease Your Debt+EdFed Savings+How Consolidation Can Ease the Social Stigma of Debt+Special Student Report: What You Need to Know About Student Loan Consolidation+Students Who Wait to Consolidate May Miss Out+The Benefits of Federal Loan Consolidation+Why Does the Federal Government Want to Help You?
read similar articles
-->If your loan falls under any of the above, then loan consolidation is a realistic option for you. Irrespective of whether you are still a student or you have graduated, you can consolidate with EdFed and ensure lower interest rates and better terms. At EdFed, we reduce your loan burdens. We offer you the following terms:
Lock in low interest rates.
No credit checks, No fees - Absolutely Free!
Loan period extendable to up to 30 years
Lower monthly payments by nearly 50%
Complete confidentiality maintained
Free live pre-qualification by government-approved agents
It's a U.S. Government Program
And it takes just 60 Seconds to Qualify! Click here to Qualify for a consolidation now. -->
Tuesday, March 31, 2009
Private student loans
These are loans that are not guaranteed by a government agency and are made to students by banks or finance companies. Advocates of private student loans suggest that they combine the best elements of the different government loans into one: They generally offer higher loan limits than federal student loans, ensuring the student is not left with a budget gap. But unlike federal parent loans, they generally offer a grace period with no payments due until after graduation (this grace period ranges as high as 12 months after graduation, though most private lenders offer six months). However, some higher education advocates are private loan detractors because of the higher interest rates, multiple fees, and lack of borrower protections private loans carry that are not associated with federal loans.
Private student loan types
Private loans generally come in two types: school-channel and direct-to-consumer.
School-channel loans offer borrowers lower interest rates but generally take longer to process. School-channel loans are 'certified' by the school, which means the school signs off on the borrowing amount, and the funds for school-channel loans are disbursed directly to the school.
Direct-to-consumer private loans are not certified by the school; schools don't interact with a direct-to-consumer private loan at all. The student simply supplies enrollment verification to the lender, and the loan proceeds are disbursed directly to the student. While direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds very quickly — in some cases, in a matter of days. Some argue that this convenience is offset by the risk of student over-borrowing and/or use of funds for inappropriate purposes, since there is no third-party certification that the amount of the loan is appropriate for the education finance needs of the student in question.
Direct-to-consumer private loans are the fastest growing segment of education finance and under legislative scrutiny due to the lack of school certification. Loan providers range from large education finance companies to specialty companies that focus exclusively on this niche. Such loans will often be distinguished by the indication that "no FAFSA is required" or "Funds disbursed directly to you."
Private student loan rates and interest
Private student loans typically have variable interest rates while federal student loans have fixed rates. Consumers should be aware that some private loans require substantial up-front origination fees. These fees raise the real cost to the borrower and reduce the amount of money available for educational purposes.
Most private loan programs are tied to one or more financial indexes, such as the Wall Street Journal Prime rate or the BBA LIBOR rate, plus an overhead charge. Because private loans are based on the credit history of the applicant, the overhead charge will vary. Students and families with excellent credit will generally receive lower rates and smaller loan origination fees than those with less than perfect credit. Money paid toward interest is now tax deductible. However, lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost. For example, many lenders will only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 6% higher, loan fees that are as much as 9% higher, and loan limits that are two-thirds lower than the advertised figures.
Private student loan fees
Private loans often carry an origination fee. Origination fees are a one-time charge based on the amount of the loan. They can be taken out of the total loan amount or added on top of the total loan amount, often at the borrower's preference. Some lenders offer low-interest, 0-fee loans. Each percentage point on the front-end fee gets paid once, while each percentage point on the interest rate is calculated and paid throughout the life of the loan. Some have suggested that this makes the interest rate more critical than the origination fee.
In fact, there is an easy solution to the fee-vs.-rate question: All lenders are legally required to provide you a statement of the "APR (Annual Percentage Rate)" for the loan before you sign a promissory note and commit to it. Unlike the "base" rate, this rate includes any fees charged and can be thought of as the "effective" interest rate including actual interest, fees, etc. When comparing loans, it may be easier to compare APR rather than "rate" to ensure an apples-to-apples comparison. APR is the best yardstick to compare loans that have the same repayment term; however, if the repayment terms are different, APR becomes a less-perfect comparison tool. With different term loans, consumers often look to 'total financing costs' to understand their financing options.
Eligible loan programs generally issue loans based on the credit history of the applicant and any applicable cosigner/co-endorser/coborrower. This is in contrast to federal loan programs that deal primarily with need-based criteria, as defined by the EFC and the FAFSA. For many students, this is a great advantage to private loan programs, as their families may have too much income or too many assets to qualify for federal aid but insufficient assets and income to pay for school without assistance.
Additionally, many international students in the United States can obtain private loans (they are ineligible for federal loans in many cases) with a cosigner who is a United States citizen or permanent resident. However, some graduate programs (notably top MBA programs) have a tie-up with private loan providers and in those cases no co-signor is needed even for international students.
The terms for private loans vary from lender to lender. A common suggestion is to shop around on ALL terms, not just respond to "rates as low as..." tactics that are sometimes little more than bait-and-switch. However, shopping around could damage your credit score.[5] Examples of other borrower terms and benefits that vary by lender are deferments (amount of time after leaving school before payments start) and forebearences (a period when payments are temporarily stopped due to financial or other hardship). These policies are solely based on the contract between lender and borrower and not set by Department of Education policies.
Federally subsidized consolidations are not available for private student loans,[6] though several lenders offer private consolidation programs. Borrowers of privately subsidized student loans may face the same restrictions to bankruptcy discharge as for government based loans: New legislation makes clear that these loans are, like federal student loans, not dischargeable under bankruptcy. Even before the legislation was passed, however, private student loans that were guaranteed 'in whole or in part' by a nonprofit entity are non-dischargeable in bankruptcy (and most private loans, regardless of the lender, were indeed guaranteed by a nonprofit).
PLUS Loan
A PLUS Loan is a student loan offered to parents of students enrolled at least half time in eligible programs at participating and eligible post-secondary institutions. As of July 1, 2006 PLUS Loans are also available to graduate and professional students at participating and eligible postsecondary institutions. PLUS loans are similar and different from Perkins and Stafford loans in various respects:
Similarities with Stafford and Perkins loans
Offered under Title IV of the Higher Education Act of 1965 (with subsequent amendments), and are therefore backed by the full faith of the United States Government
Available both through the Federal Direct Student Loan Program (FDSLP, also known as Direct) or from a private lender through the Federal Family Education Loan Program (FFELP)
Can be consolidated through the College Consolidation Loan program
Differences from Stafford and Perkins loans
Become due for repayment immediately (Ended as of July 1, 2008), and there is only interest rate term
When taken by a parent, becomes a commitment by the parent, rather than the student
Are subject to higher interest rates (i.e., 7.9% in Direct and 8.5% in FFELP)
Can be incurred in amounts that cover up the entire cost of education (including living expenses), less other financial aid
Offer different repayment plans, though there is no interest rate or accrual relief involved in any of the plans
Eligibility is based on the parents or graduate students in question not having an adverse credit history
Changes as of July 1, 2006
Like the Stafford loan program, the PLUS program changed to a higher, but fixed rate, structure for loans disbursed after midnight, July 1, 2006. The rate offered through the Direct Loan Program will be 7.9%, while the FFELP will be 8.5% — although price competition may result in lower rates and incentives in the FFELP.
Additionally, the PLUS program is now available for graduate and professional students to borrow to finance their own educations. The program is expanding away from a parent-only program to include graduate school students. The new option is commonly referred to as the Grad PLUS loan.
Amendments were made to the PLUS Master Promissory Note in an addendum to accommodate the changes in eligibility as well as the new fixed rate structure.
Similarities with Stafford and Perkins loans
Offered under Title IV of the Higher Education Act of 1965 (with subsequent amendments), and are therefore backed by the full faith of the United States Government
Available both through the Federal Direct Student Loan Program (FDSLP, also known as Direct) or from a private lender through the Federal Family Education Loan Program (FFELP)
Can be consolidated through the College Consolidation Loan program
Differences from Stafford and Perkins loans
Become due for repayment immediately (Ended as of July 1, 2008), and there is only interest rate term
When taken by a parent, becomes a commitment by the parent, rather than the student
Are subject to higher interest rates (i.e., 7.9% in Direct and 8.5% in FFELP)
Can be incurred in amounts that cover up the entire cost of education (including living expenses), less other financial aid
Offer different repayment plans, though there is no interest rate or accrual relief involved in any of the plans
Eligibility is based on the parents or graduate students in question not having an adverse credit history
Changes as of July 1, 2006
Like the Stafford loan program, the PLUS program changed to a higher, but fixed rate, structure for loans disbursed after midnight, July 1, 2006. The rate offered through the Direct Loan Program will be 7.9%, while the FFELP will be 8.5% — although price competition may result in lower rates and incentives in the FFELP.
Additionally, the PLUS program is now available for graduate and professional students to borrow to finance their own educations. The program is expanding away from a parent-only program to include graduate school students. The new option is commonly referred to as the Grad PLUS loan.
Amendments were made to the PLUS Master Promissory Note in an addendum to accommodate the changes in eligibility as well as the new fixed rate structure.
Disbursement: How the money gets to student or school
There are two distribution channels for federal student loans: Federal Direct Student Loans and Federal Family Education Loans.
Federal Direct Student Loans, also known as Direct Loans or FDLP loans, are funded from public capital originating with the U.S. Treasury. FDLP loans are distributed through a channel that begins with the U.S. Treasury Department and from there passes through the U.S. Department of Education, then to the college or university and then to the student.
Federal Family Education Loan Program loans, also known as FFEL loans or FFELP loans, are funded with private capital provided by banking institutions (i.e., banks, savings and loans, and credit unions). Because the FFELP loans use private capital as their source, students who use FFELP loans are able to take advantage of payment options that are similar to those available to customers who take out a home loan or a consumer loan. For example, some institutions will allow a discount for automatic payments or a series of on-time payments. In 2005, approximately two-thirds of all federally subsidized student loans were FFELP.
According to the U.S. Department of Education, more than 6,000 colleges, universities, and technical schools participate in FFELP, which represents about 80% of all schools. FFELP lending represents 75% of all federal student loan volume.
The maximum amount that any student can borrow is adjusted from time to time as federal policies change. A study published in the winter 1996 edition of the Journal of Student Financial Aid, “How Much Student Loan Debt Is Too Much?” suggested that the monthly student debt payment for the average undergraduate should not exceed 8% of total monthly income after graduation. Some financial aid advisers have referred this as "the 8% rule." Circumstances vary for individuals, so the 8% level is an indicator, not a rule set in stone. A research report about the 8% level is available at [1]
Federal Direct Student Loans, also known as Direct Loans or FDLP loans, are funded from public capital originating with the U.S. Treasury. FDLP loans are distributed through a channel that begins with the U.S. Treasury Department and from there passes through the U.S. Department of Education, then to the college or university and then to the student.
Federal Family Education Loan Program loans, also known as FFEL loans or FFELP loans, are funded with private capital provided by banking institutions (i.e., banks, savings and loans, and credit unions). Because the FFELP loans use private capital as their source, students who use FFELP loans are able to take advantage of payment options that are similar to those available to customers who take out a home loan or a consumer loan. For example, some institutions will allow a discount for automatic payments or a series of on-time payments. In 2005, approximately two-thirds of all federally subsidized student loans were FFELP.
According to the U.S. Department of Education, more than 6,000 colleges, universities, and technical schools participate in FFELP, which represents about 80% of all schools. FFELP lending represents 75% of all federal student loan volume.
The maximum amount that any student can borrow is adjusted from time to time as federal policies change. A study published in the winter 1996 edition of the Journal of Student Financial Aid, “How Much Student Loan Debt Is Too Much?” suggested that the monthly student debt payment for the average undergraduate should not exceed 8% of total monthly income after graduation. Some financial aid advisers have referred this as "the 8% rule." Circumstances vary for individuals, so the 8% level is an indicator, not a rule set in stone. A research report about the 8% level is available at [1]
Federal student loans to parents
Usually these are PLUS loans (formerly standing for "Parent Loan for Undergraduate Students"). Unlike loans made to students, parents can borrow much more — usually enough to cover any gap in the cost of education. However, there is no grace period: Payments start immediately.
Parents should be aware that THEY are responsible for repayment on these loans, not the student. This is not a 'cosigner' loan with the student having equal accountability. The parents have signed the master promissory note to pay and, if they do not do so, it is their credit rating that suffers. Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time four years have been funded through loans. The combination of immediate repayment and the ability to borrow substantial sums can be expensive.
Under new legislation, graduate students are eligible to receive PLUS loans in their own names. These Graduate PLUS loans have the same interest rates and terms of Parent PLUS loans.
Parents should also be aware that legislation raised the interest rate on these loans significantly — to 8.5% on July 1, 2006
Parents should be aware that THEY are responsible for repayment on these loans, not the student. This is not a 'cosigner' loan with the student having equal accountability. The parents have signed the master promissory note to pay and, if they do not do so, it is their credit rating that suffers. Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time four years have been funded through loans. The combination of immediate repayment and the ability to borrow substantial sums can be expensive.
Under new legislation, graduate students are eligible to receive PLUS loans in their own names. These Graduate PLUS loans have the same interest rates and terms of Parent PLUS loans.
Parents should also be aware that legislation raised the interest rate on these loans significantly — to 8.5% on July 1, 2006
Stafford Loan Aggregate Limits
Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. For undergraduate students, these amounts are $23,000 in subsidized and $34,500 in unsubsidized loans. [1]Once a student has borrowed the maximum amount s/he is eligible for (based on grade level, such as undergraduate, graduate/professional, etc.), in subsidized loans, the student will have the option to take out a loan in an additional amount less than or equal to the amount s/he would have been eligible for in subsidized loans. Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student will not be able to borrow additional Stafford loans until a portion of the borrowed funds has been paid back to the respective lender(s). Once the student has paid back some of these amounts, s/he will regain eligibility up to the aggregate limits as before.
[edit] Federal loans to students
Federal student loans in the United States are authorized under Title IV of the Higher Education Act as amended.
These loans are available to college and university students via funds disbursed directly to the school and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need.
Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. Nearly all students are eligible to receive federal loans (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The dependent undergraduate limit effective for loans disbursed on or after July 1, 2008 is as follows (combined subsidized and unsubsidized limits): $5,500 per year for freshman undergraduate students, $6,500 for sophomore undergraduates, and $7,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. For independent undergraduates, the limits (combined subsidized and unsubsidized) effective for loans disbursed on or after July 1, 2008 are higher: $9,500 per year for freshman undergraduate students, $10,500 for sophomore undergraduates, and $12,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.
Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Nearly all student are eligible for these loans regardless of demonstrated need. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Interest will begin accruing on the $12,000. The accrued interest will be "capitalized" into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college; however, few students choose to exercise this option.
Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.
These loans are available to college and university students via funds disbursed directly to the school and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need.
Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. Nearly all students are eligible to receive federal loans (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The dependent undergraduate limit effective for loans disbursed on or after July 1, 2008 is as follows (combined subsidized and unsubsidized limits): $5,500 per year for freshman undergraduate students, $6,500 for sophomore undergraduates, and $7,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. For independent undergraduates, the limits (combined subsidized and unsubsidized) effective for loans disbursed on or after July 1, 2008 are higher: $9,500 per year for freshman undergraduate students, $10,500 for sophomore undergraduates, and $12,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.
Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Nearly all student are eligible for these loans regardless of demonstrated need. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Interest will begin accruing on the $12,000. The accrued interest will be "capitalized" into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college; however, few students choose to exercise this option.
Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.
Student loans in the United States
Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well.
Federal student loans made to parents: Much higher limit, but payments start immediately
Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
Federal student loans made to parents: Much higher limit, but payments start immediately
Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
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
Federal student loan consolidation
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.[
PLUS Loan Consolidation
A PLUS Loan consolidation is a practical, debt management tool that enables you to bundle all of the federal loans you received to finance your child's college education into a single loan. In addition to simplifying record keeping and check-writing chores, PLUS Loan consolidation can significantly reduce your monthly payment burden. The lower payment means you'll have more money available to meet other household expenses, including car payments, childcare, and career-related necessities.
How Will the Lower Rate Affect Your Loan After You Fulfill the 12-Payment Requirement?
After you successfully fulfill the 12-payment requirement, the 0.8 percent rate reduction will be applied permanently toward your interest rate. At this point, the savings that result from the lower interest rate will be applied toward reducing your monthly payment.
Please Contact Us for Additional Information
Website - See our list of Questions and Answers related to the Repayment Incentive Program.
Phone: Talk with a loan representative between 8 a.m. and 8 p.m., EST, Monday through Friday, at 1-800-557-7392 (TDD 1-800-557-7395).
Please Contact Us for Additional Information
Website - See our list of Questions and Answers related to the Repayment Incentive Program.
Phone: Talk with a loan representative between 8 a.m. and 8 p.m., EST, Monday through Friday, at 1-800-557-7392 (TDD 1-800-557-7395).
How Will the Lower Rate Affect Your Loan Before You Fulfill the 12-Payment Requirement?
You will not see a reduction in the amount of your monthly payment until after you fulfill the 12-payment requirement. Until then, the savings that result from the 0.8 percent interest rate reduction will be applied toward reducing the principal balance of your Direct Consolidation Loan.
Information for borrowers who consolidated during the Repayment Incentive Program (10/1/00 - 9/30/01)
As an incentive to encourage timely student loan repayments, all borrowers who consolidated eligible student loans into the Federal Direct Consolidation Loan Program between October 1, 2000, and September 30, 2001 received an immediate interest rate reduction of 0.8 percent. To keep this benefit beyond the initial 12-month period, borrowers must make the first 12 monthly payments on time. The 0.8 percent rate reduction will become permanent once these first 12 payments are made on time.
For example, if your Direct Consolidation Loan interest rate is 8.25 percent, your interest rate drops to 7.45 percent. If you make your first 12 payments on time, you keep that interest rate and could save more than $400 for every $10,000 borrowed over a standard 10-year term.
For example, if your Direct Consolidation Loan interest rate is 8.25 percent, your interest rate drops to 7.45 percent. If you make your first 12 payments on time, you keep that interest rate and could save more than $400 for every $10,000 borrowed over a standard 10-year term.
Federal Family Education Loans (FFEL) Interest Rates
Interest rates for FFEL Program for the period July 1, 2008 through June 30, 2009.
Introductory information
regarding the new variable interest rates. [PDF Format (16K)]-->
FFEL "Converted " Variable-rate Stafford Loans [PDF Format (17K)]
FFEL Regular Variable-rate Stafford Loans [PDF Format (15K)]
FFEL Variable-rate PLUS and SLS Loans [PDF Format (30K)]
FFEL Variable-rate and Fixed-rate Consolidation Loans [PDF Format (28K)]
Introductory information
regarding the new variable interest rates. [PDF Format (16K)]-->
FFEL "Converted " Variable-rate Stafford Loans [PDF Format (17K)]
FFEL Regular Variable-rate Stafford Loans [PDF Format (15K)]
FFEL Variable-rate PLUS and SLS Loans [PDF Format (30K)]
FFEL Variable-rate and Fixed-rate Consolidation Loans [PDF Format (28K)]
Direct Loan and FFEL Interest Rates from July 1, 2008 to June 30, 2009
Direct Loans Interest RatesInterest rates for Direct Loan Program loans for the period July 1, 2008 through June 30, 2009.
Introductory
information regarding the new variable interest rates. [PDF
Format (37K)] -->
Federal Direct Subsidized Loans [PDF Format (16K)]
Federal Direct PLUS Loans [PDF Format (9K)]
Federal Direct Subsidized Consolidation Loans and Federal Direct Unsubsidized Consolidation Loans [PDF Format (14K)]
Introductory
information regarding the new variable interest rates. [PDF
Format (37K)] -->
Federal Direct Subsidized Loans [PDF Format (16K)]
Federal Direct PLUS Loans [PDF Format (9K)]
Federal Direct Subsidized Consolidation Loans and Federal Direct Unsubsidized Consolidation Loans [PDF Format (14K)]
Current Consolidation Interest Rate.
The interest rate for a Direct Consolidation Loan is the weighted average of the interest rates on the loans being consolidated (as of the date we receive the application), rounded to the nearest higher one-eighth of one percent. This rate is fixed for the life of the loan and cannot exceed 8.25 percent. Use our online calculator, or call us at 1-800-557-7392, to estimate your weighted average interest rate and to see what your loan payments might be under each of our four repayment plans.
Six steps to calculate the Weighted Average Interest Rate
Step 1:
Multiply each loan by its interest rate to obtain the "per loan weight factor."
Step 2:
Add the per loan weight factors together.
Step 3:
Add the loan amounts together.
Step 4:
Divide the "total per loan weight factor" by the total loan amount and then multiply by 100.
Step 5:
*Round the result of Step 4 to the nearest higher one-eighth of one percent if it is not already on an eighth of a percent.
Step 6:
Compare the result of Step 5 with the interest rate cap of 8.25 percent. The fixed interest rate on the Direct Consolidation Loan will be the lower of the two.
Six steps to calculate the Weighted Average Interest Rate
Step 1:
Multiply each loan by its interest rate to obtain the "per loan weight factor."
Step 2:
Add the per loan weight factors together.
Step 3:
Add the loan amounts together.
Step 4:
Divide the "total per loan weight factor" by the total loan amount and then multiply by 100.
Step 5:
*Round the result of Step 4 to the nearest higher one-eighth of one percent if it is not already on an eighth of a percent.
Step 6:
Compare the result of Step 5 with the interest rate cap of 8.25 percent. The fixed interest rate on the Direct Consolidation Loan will be the lower of the two.
Both federal student loan consolidation and private student loan consolidation offer the benefit of a significantly lower monthly payment and simplified finances. If you want to consolidate student loans, begin with your federal Stafford, Parent PLUS, Perkins, and all Federal FFELP and Federal Direct Loans that were taken out for your education. Private student loan consolidation is a separate program that allows you to refinance all non-federal, education related debt.
Even if you can make the monthly payments from your original school loans, you may still want to consider consolidating to lower your payments and free up money for bills with higher interest rates. These include credit cards and personal loans, neither of which have tax-deductible interest. Check out the links below for additional information on how to consolidate student loans, specifically federal loans, private loans, and frequently asked questions.
Apply for Federal or Private Consolidation
Even if you can make the monthly payments from your original school loans, you may still want to consider consolidating to lower your payments and free up money for bills with higher interest rates. These include credit cards and personal loans, neither of which have tax-deductible interest. Check out the links below for additional information on how to consolidate student loans, specifically federal loans, private loans, and frequently asked questions.
Apply for Federal or Private Consolidation
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