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Federal Consolidation Loans allow borrowers to combine their federal education loans into a single loan with one monthly payment, which can be significantly lower than the payment required under the standard 10-year repayment option. Most borrowers with Federal Stafford, PLUS, Perkins, and other federal education loans are eligible for the Federal Consolidation Program.
Consolidation loans are provided by banks, secondary markets, credit unions and other lenders under the Federal Family Education Loan Program (FFELP), and by the federal government under the Federal Direct Loan Program. In general, consolidation loans issued under the FFELP and the Direct Loan Program carry the same terms and conditions.
Consider the Cost
Consolidation can significantly increase the total cost of loan repayment. Consolidation offers lower monthly payments by giving borrowers up to 20 years longer to repay their loans. Thus, a borrower will make more payments and pay more in interest.
Borrowers, especially those who do not need monthly payment relief, should compare the cost of repaying their unconsolidated loans against the cost of repaying a consolidation loan. Students should also take into account the impact of losing any borrower benefits offered under non-consolidated repayment plans. Borrower benefits, which may include interest rate discounts or principal rebates, can significantly reduce the cost of repaying student loans.
Consolidation Loans Cannot be Unmade
Once made, Federal Consolidation Loans cannot be unmade. That’s because the loans that were consolidated have been paid off and no longer exist. Borrowers should take the time to study their options before submitting a consolidation application. A checklist has been designed to help a borrower determine whether and how loans should be consolidated. A Federal Student Loan Interest Rate and Consolidation Fact Sheet also provides additional information about the Federal Loan Consolidation Program.
unILoan Program
ISAC’s loan consolidation program, unILoan, enables borrowers to combine various educational loans into a single, manageable loan. Through this federal program, a borrower can extend the repayment terms of various loans, based on the dollar amount of loans being consolidated. Income sensitive repayment schedules are also available. Limited deferment categories are available, and portions of the consolidated loan may be eligible for interest subsidy during the deferred period. The unILoan Worksheet will help determine which of a borrower’s existing loans qualify for consolidation and provide additional information about the program.
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