Repay Student Loans

The very first step: Take inventory of your student loans.
For information on your student loans, review your loan documents, and contact your lender or loan servicer.

Monthly Payment Amount

If you are not in repayment status yet, estimate your monthly non- consolidated loan payment based on the current interest rate and your loan balance. You can get payment amounts by calling your lender or loan servicer.

Next Steps

Determine whether your monthly payment exceeds the percentage of your income to be allocated to student loan payment. This percentage should be based on a realistic budget.

–If payment exceeds monthly allocation, reevaluate budget and assess income situation.

Consider deferment or forbearance option for short-term payment relief needs.

–If debt relief needs are long term, consider consolidation.

Select loans for consolidation.

Determine monthly payment and total interest costs for Consolidation Loan and compare to cost of repaying loans without consolidation.

–For help in calculating monthly payments, contact your lender or loan servicer.

Consider the impact of consolidation on future deferment options, cancellation options, and other borrower benefits such as interest rate discounts or principal rebates, which can significantly reduce the cost of repaying your loans. You might lose some discharge (cancellation) benefits or deferment benefits if you include certain types of loans in your Consolidation Loan—Federal Perkins Loans, for example. To find out more about the impact consolidating might have on deferment and cancellation benefits, contact the holder of your loan.

If you decide consolidation is right for you, contact your lender to begin the consolidation process.

If eligible for in-school consolidation and planning to consolidate while in school, make sure to apply prior to leaving school. — >
If still in the grace period, consider consolidating approximately two months before the end of the grace period to allow enough time to have your Consolidation Loan processed before the grace period expires, yet not so early that you lose too much of your grace period if you have a FFEL Consolidation Loan. (For FFEL Consolidation Loans, if you consolidate during the grace period, you give up whatever portion of your grace period remains. You retain all of your grace period, however, if you have a Direct Consolidation Loan.) Some FFEL lenders offer to hold disbursement of Consolidation Loans until the end of the grace period to enable borrowers to minimize their interest rate and maximize their grace period.

Remember that if you consolidate during your grace period, you can lock in an interest rate at least a half percent lower than the current repayment rate.

When filling out the consolidation application, provide complete address information, include two references, and sign the promissory note.

If already in repayment, make sure to continue making payments on your loans until consolidation is completed.

–If you need immediate payment relief, request deferment or forbearance.

If you have questions about consolidation, do not hesitate to contact your lender or loan servicer. Check your loan documents for the toll-free customer assistance number.

Source: U.S. Department of Education

Borrowers are encouraged to check with their existing loan holders or servicers to find out about consolidation options available to them. Some differences between programs may include:

• Minimum balances or numbers of loans required to apply.
• Types of loans that can be consolidated.
• A prior account relationship may be required.
• Repayment incentive benefits to encourage good repayment behavior.
• The convenience of electronic debit, ensuring that monthly payments are made on time.
• Repayment plans offered, such as payments sensitive to a borrower’s income, family size, and total education indebtedness.

Source: U.S. Department of Education

Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

One Lender and One Monthly Payment

With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.

Flexible Repayment Options

Borrowers can choose from four different plans to repay their Direct Consolidation Loan, including an Income Contingent Repayment Plan. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at anytime.

No Minimum or Maximum Loan Amounts or Fees

There is no minimum amount required to qualify for a Direct Consolidation Loan! In addition, consolidation is free.
Varied Deferment Options

Borrowers with Direct Consolidation Loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a Direct Consolidation Loan may renew many of those deferment options. In addition, borrowers may be eligible for additional deferment options if they have an outstanding balance on a FFEL Program loan made before July 1, 1993, when they obtain their first Direct Loan.

Reduced Monthly Payments

A Direct Consolidation Loan may ease the strain on a borrower’s budget by lowering the borrower’s overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower’s Federal education loans.

Retention of Subsidy Benefits

There are two (2) possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.

The present state of your Subsidized, Unsubsidized, PLUS, or Consolidation loan(s).

An account will be either:

• in-School
• in-Military
• grace
• repayment-current
• repayment-delinquent
• deferment
• forbearance
• paid-in-full
• suspended
• default

Delays the processing of your Direct Consolidation Loan until closer to the end of your grace period if any of the loans you want to consolidate are in a grace period.

Normally, when you consolidate your existing loan(s) into a new Direct Consolidation Loan, you will be required to start repayment of your new loan immediately. However, if any loan you want to consolidate is still in a grace period, you can delay entering repayment on your new Direct Consolidation Loan until closer to your grace period end date by entering your expected grace period end date (month and year) in the space provided on the application. We will start processing your application about 45 days before the expected grace period end date that you provide. If you leave the expected grace period end date blank on your consolidation application, your Direct Consolidation Loan will enter repayment immediately.You can select a date up to nine (9) months into the future. If your grace end date is more than 9 months away, wait to submit your application.

Source:  U.S. Department of Education

The process of combining one or more eligible educational loans into a single new loan. The Direct Loan Program offers a Direct Consolidation Loan for those borrowers who are interested in consolidating their eligible educational loans.