Loan Consolidation

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Loan Consolidation

• (insert school name here)

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Agenda

• Define loan consolidation
• Should I consolidate?
• Investigate a new loan
• Compare consolidation loans
• How to apply

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What Is Loan Consolidation?
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Loan Consolidation Is...

• Refinance existing loans into one loan
• Create a single new loan payment
• Fixed interest
• Up to 30 years to repay

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Should I Consolidate?

• Alternatives
• Repayment options
• Eligibility requirements
• Advantages and disadvantages

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Alternatives

• Deferment and forbearance
• Repayment options
• Combining multiple loans
• Combining multiple payments

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Combining Loans or Payments

• Multiple loans held by one lender
• Serialized (combined)
• Combined payment is equally applied across loans
• Lenders may
• Arrange loan purchases from other lenders
• Combine billing for loans that are ineligible for
  serialization
• Variation from lender to lender

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Repayment Options

• FFEL repayment options
• Standard
• Extended
• Graduated
• Income-Sensitive (ISR)
• Direct repayment options
• Standard
• Extended
• Graduated
• Income-Contingent (ICR)

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Standard Repayment

• FFEL
• Term
• Up to 10 years
• Payment
• Fixed amount
• Minimum of 50

• Direct
• Term
• Up to 10 years
• Payment
• Fixed amount
• Minimum of 50

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Extended Repayment

• FFEL
• Term
• Up to 25 years
• Must exceed 30,000
• Payment
• Fixed amount
• Minimum of 50

• Direct
• Term
• Up to 30 years
• Based on principal balance
• Payment
• Fixed amount
• Minimum of 50

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Graduated Repayment

• FFEL
• Term
• Typically 10 years
• Varies
• Payment
• Initial years pay interest only
• Increases over repayment term
• No payment more than 3 times another

• Direct
• Term
• Up to 30 years
• Based on principal balance
• Payment
• Stair-steps
• Initial payments are interest only
• Increase every 2 years

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Income Dependent Repayment

• FFEL
• Income-Sensitive (ISR)
• Term varies
• Payment
• Adjusted annually
• Based on borrowers gross income
• Minimum interest only
• No payment more than 3 times another
• Mandatory administrative forbearance may be
  granted for up to 5 years

• Direct
• Income-Contingent (ICR)
• Term
• Up to 25 years
• Payment
• Based on household income relative to principal
• Current year income initially
• Prior year income basis after 2 years

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Eligibility Requirements

• FFEL consolidation
• in grace or repayment
• in default
• Direct consolidation
• in school
• in grace or repayment
• in default

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Typical Advantages

• Eliminates multiple payments
• Decreases payment
• Opportunity to
• Lower rate
• Lock rate
• Secure incentives

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Typical Disadvantages

• Increases
• Repayment term
• Total amount repaid
• Total interest repaid
• Fixes rate (variable rates may drop)
• Loss of current lender incentives
• Deferment, forbearance, subsidy, and cancellation
  eligibility may change

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Investigate a New Loan

• Determine which loans are eligible for
  consolidation
• Estimate the numbers
• Repayment period
• Interest rate
• Monthly payment
• Learn the new terms

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Eligible Loanswww.nslds.ed.gov

• Subsidized Stafford Loans
• Unsubsidized Stafford Loans
• Consolidation Loans
• Perkins Loans
• William D. Ford Federal Direct Loans

• Health Professions Student Loans (HPSL)
• Health Education Assistance Loans (HEAL)
• Loans for Disadvantaged Students
• PLUS Loans

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FFEL Repayment Periods
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Direct Repayment Periods
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Interest Rate
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Monthly Payment
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Terms

• Deferment
• Forbearance
• Repayment incentives
• On-time payments
• Direct pay

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Compare Consolidation Loans

• FFEL vs. Direct
• Overview of benefits
• Deferment options
• Alternative products

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Federal vs. Direct Consolidation

• FFEL Direct
• WAIR WAIR
• yes yes
• no yes
• yes no
• yes yes
• yes yes

• Interest Rate
• Available repayment plans
• Standard
• Income Contingent
• Income Sensitive
• Graduated
• Extended

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Federal vs. Direct Consolidation

• Prepayment without penalty
• Cancellation upon borrowers death or total
  disability
• Grace period

• FFEL Direct
• yes yes
• yes yes
• no yes (in-school only)

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How To Apply

• When is the best time?
• Are there fees?
• How long does it take?
• Where can I get more information?

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Apply.

• When is the best time?
• Must be in grace or repayment
• Grace period interest rate is lower than
  repayment interest rate
• Are there any fees?
• No fees
• No prepayment penalties
• How long does it take?
• Generally 30 to 90 days

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More Information

• Federal Direct Consolidation Loan Information
  Center
• www.loanconsolidation.ed.gov
• FinAid! The SmartStudent Guide to Financial Aid
• www.finaid.org
• EDFUND
• www.edfund.org

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Questions?
Loan Consolidation