FAQs about Loan Consolidation
What is loan consolidation?
Loan Consolidation allows you to reduce your monthly student loan payments by combining all of the federal loans you have received into a single loan with an extended repayment term and a fixed interest rate.
How does a consolidation loan work?
When you consolidate, your consolidation lender pays the outstanding balances on the loans you consolidate. In essence, you refinance your educational debts.
What are some benefits to consolidating my student loans?
Consolidation can significantly reduce your monthly payments. It's because consolidation allows you to stretch your repayment period from the standard ten years up to 30 years, depending on the amount of your outstanding educational debt. Also, federal student loan interest rates are at an all time low. When consolidating loans, you lock in the interest rate for the duration of your new loan.
What are some drawbacks to consolidating my loans?
Extending the repayment period increases the amount of total interest costs you will encounter. You will be repaying your debt at a slower rate so interest will have a longer time frame to accrue. You may also loose your right to certain deferments and forbearance opportunities. You need to make sure to explore this with your lender before you enter into a consolidation loan.
How long will it take to process my consolidation loan?
It only takes approximately three to four weeks to process a consolidation loan once your lender receives a completed application. You will receive a disclosure statement and new repayment schedule from your loan servicer once processing is complete.
Is there an application fee or credit check required to consolidate?
No. By law, there cannot be a charge for the application fee or to perform a credit check.
How is the interest rate on my new loan determined?
Your consolidation loan will have a fixed interest rate that is based on the weighted average of the interest rates of the loans you consolidate (rounded up to the nearest 1/8th percent) or 8.25%, whichever is less.
What are the eligibility requirements?
To be eligible for a Federal Consolidation loan, you must consolidate at least $10,000 in eligible Federal student loans and must be in an active repayment or grace period status on your loans.
What student loans are eligible to be consolidated?
- Subsidized Federal Student Loans
- Unsubsidized Federal Student Loans
- Federal Perkins Loans
- Health Professions Student Loans
- Health Education Assistance Loans
- Federal Insured Student Loans
- Federal PLUS (Parent) Loans
- Federal Nursing Loans
Which lender should I consolidate my loans with?
Federal regulations require that if your loans are funded through a single lender you must first approach that lender for consolidation. If that lender is unable to offer you a Federal consolidation loan you may approach a lender of your choosing.
What if I don't know whether my loans are with a single or multiple lenders?
If you are unsure as to whom the current holder of your loans is, visit the National Student Clearinghouse's Loan Locator website at http://www.nslc.org/. This will allow you to do a search on your social security number and birth-date to see who currently owns your loans.
Am I still eligible to consolidate if my education loans are in default?
You cannot consolidate loans that are currently in default (270 consecutive days overdue).
Can my spouse and I consolidate our education loans into one consolidation lane?
Yes. Roanoke College does not recommend it however.
What different repayment plans are available to me if I consolidate?
Students who consolidate their loans have 5 different repayment options available to them. They include:
- Level Repayment Plan
- Two-Year Graduated Repayment Plan
- Four-Year Graduated Plan
- Income-Sensitive Plan
- Extended Repayment Plan
When does repayment begin on my consolidation loan?
You are required to begin repayment on your consolidation loan within 30 days of its funding date.
Are there any fees or penalties associated with early repayment?
Roanoke College's default rate is approximately 2.9%.
Are there deferment options available to me if I consolidate?
No. You can repay your consolidation loan early without a penalty.
Are there forbearance options?
Under federal regulations your lender is generally not required to grant forbearance and may require you to provide reasons for the request and other information. It will be up to them if they are willing to extend this opportunity to you.
Can I add loans to my consolidation loan after it has been processed?
Yes. You have 180 days after your consolidation loan's funding date to add additional eligible loans to your consolidation loan. To add a loan, contact your lender.
Should I continue to make my payments on the student loans that I am consolidating while myapplication is processing?
Yes. It is extremely important to continue to make all of your regular payments on the loans that you have selected to consolidate until you receive your new disclosure statement and repayment schedule from your lender.