Loan Consolidation Information for Graduating Students

Important Questions to Ask when consolidating

1. Does the consolidation plan charge me to consolidate? What is the minimum loan amount needed?

Never pay anyone to consolidate your loans. The majority of plans are free! Direct Loans allows you to consolidate only one Direct Stafford Loan. Some plans require a minimum amount borrowed, like $5,000 or $10,000, before you can consolidate.

2. Can I select my own repayment plan? Are there any penalties for early repayment?

Most consolidation programs offer multiple repayment plans for you to choose from. Some plans lock you in to a repayment term based on your loan amounts, and make it difficult for you to repay your loans sooner. When comparing repayment terms from different companies, be wary of terminology that sounds similar, but is not exactly the same. Not all repayment terms are created equal!

3. What incentives does the plan offer?

Many consolidation programs offer rebates for signing up for direct debit billing. Other programs may have additional benefits. You should consider how long it takes you to achieve these benefits before consolidating. If it takes you three or four years to receive the benefit, you might not be getting the best deal. Can your incentives be revoked if you miss a payment later? If it sounds too good to be true, it probably is!

4. Do I have loans that could be discharged or forgiven at a later date?

Certain professions, like teachers, lawyers, or those enrolled in the military, may be eligible to have part of their Stafford or Perkins Loan debt forgiven. If you qualify for loan forgiveness, you should not consolidate your eligible loans, as they cannot be removed from the consolidated loan to be individually forgiven.