Exit Session Edition
Want to learn more about federal loan consolidation, how it
may assist you, and how to apply? You've come to the right
place! There's quite a bit of information available about
loan consolidation, so this page is somewhat long. Take
your time, but be sure to review all the information before
making any consolidation decisions.
Current interest rates are at an all-time low for federal Stafford
Loans. For those interested in the updated printable version
of Fast
Facts About Consolidation, which includes the additional
section: Advanced Fast Facts, please click on the link. You
can browse the information below or utilize the quick links
below to jump to your desired section.
What is loan consolidation?
Which loans can be consolidated?
Should I consolidate my loans if I am still enrolled at Georgetown Law?
Is it financially worthwhile to consolidate?
What should I do with my Perkins loans or other federal loans?
How your Consolidation
Loan Interest Rate is Determined
Who offers loan consolidation programs?
How do I qualify and when can I apply for
consolidation?
How many years do I have to repay a consolidated
loan?
Should my spouse and I consolidate our loans
together?
Is there a specific
timeline for consolidation?
Are there any repayment
incentives?
.
What is loan consolidation
and which loans can be consolidated?
A consolidation loan converts several federal
student loan promissory notes into a unified promissory
note with new repayment terms. Borrowers consolidate
for several reasons, including bringing loans from multiple
lenders together, lowering required monthly payments,
and lengthening the repayment term.
Loans eligible for consolidation
include:
- Federal Family Education Loan (FFELP) Program Loans
( Stafford , PLUS, SLS, and Consolidation)
- Federal Direct Student Loan (FDSL) Program Loans
( Stafford , PLUS, and Consolidation).
- Federal Perkins Loans
- Additional Federal Loans not commonly held by Georgetown Law
students: (FISL, HPSL, HEAL, LDS, NSL)
Loans commonly held by Georgetown Lawgrads NOT eligible for
consolidation include:
- Commercial loans such as: Law Access, T.H.E. ( Northstar
), Law Achiever, CitiAssist
- Bar Study Loans
Should I consolidate my loans if
I am still enrolled at Georgetown Law?
Prior to June 30, 2006 the interest rate on the federal consolidation loan can be as low as 4.75%. Students should review our in-school consolidation page for more information. After July 1, 2006 in-school consolidation will no longer be offered. The Financial Aid Office will provide advice applicable to each class at that point. Consolidating your loans while in school will force you into immediate repayment once you leave school (or drop below half-time enrollment), sacrificing the standard six month grace period, however, graduating students are allowed to request a forbearance to prevent immediate repayment. If the rules change and this advice needs to be updated, we will email all currently enrolled Stafford loan borrowers.
Is
it financially worthwhile to consolidate?
The interest rates in effect when you are deciding
to consolidate will help to determine if consolidation is a
good financial option for you. To help in this decision making
process, the Financial Aid Office publishes guidelines for consolidation
at the end of each academic year. For May 2006 graduates, the
interest rate in effect through June 30 will allow students to lock in
a rate of 4.75% for the life of the loans.
In addition, if you can't afford to make the normal
payments on a 10-year repayment schedule, consolidating
for a longer period of time will lower your monthly
payments, but may also increase the total amount of
interest paid. Students borrowing Federal Stafford Loans
for the first time after October 7, 1998 may extend
their repayment up to 25 years without consolidation,
however, without consolidating the loans, the interest
rate will remain variable. Students with multiple federal
lenders may wish to consolidate for the sake of convenience.
Also, lenders may offer "direct debit" payment options
that can ease the burden of having multiple lenders.
What should I do with my Perkins loans or other federal loans?
Note: You do not have to consolidate all
of your eligible loans. For instance, in the past, graduates
have opted to pay off their low-interest Perkins loan separately.
However, as the Stafford Loan interest rates through June 30, 2006
are below 5%, including Perkins loans in a consolidation may
slightly increase the interest rate on the
entire loan. Graduates with commercial loans, however, will
find that their combined required monthly federal loan payments
will be reduced through consolidation. This provides the graduate
a greater ability to prepay the more expensive commercial loans.
Please be advised: Perkins loans
carry certain cancellation provisions (primarily addressing
law enforcement employment and providing legal services
to children), which will no longer be valid if you consolidate
them with your Federal Stafford Loans. Please contact
the Office of Financial Aid if you have concerns regarding
the inclusion of your Perkins loan(s) in your consolidation
application.
Through June 30, 2006, the interest rates
on federal subsidized and unsubsidized Stafford loans are 4.7%
while in school and in a grace period and 5.3% in repayment.
This rate is determined by the last auction of the 91-day T-bill
in May, plus 1.7% and 2.3% respectively. The Higher Education
Act and its Amendments dictate the interest rate terms of federal
loans, which have changed many times over the years. As a result,
if you have borrowed federal loans prior to August 1998, it
is likely that the interest rates on those loans will be higher
than the rates mentioned above. The interest rates on your loans
are most likely variable and are subject to change each year
on July 1st. By consolidating your loans, you can lock in an
interest rate throughout the life of the loan.
How your Consolidation
Loan Interest Rate is Determined
The interest rate on Federal Consolidation Loans is set at the
weighted average of the loans selected for consolidation rounded
up to the nearest 1/8%. For example, with the current in-grace
rate of 4.7%, the consolidation interest rate will be increased
to 4.75%. There is an 8.25% interest rate cap on the consolidation
loan. If you are not currently a graduate, but you are interested
in where the interest rate is heading, you can monitor the 91-day
T-bill interest rate by viewing bankrate.com/ust/ratehm.asp.
To serve as a basis for comparison, the 91-day T-bill rate was
3% as of the last auction date in May 2005.
A side benefit: Consolidating your
loans (even if you plan to pay them over the normal
repayment term) may increase your eligibility for a
home mortgage. With the lower mandatory monthly payment
that consolidation offers, a borrowers debt to income ratio
decreases and makes the mortgage payments appear more
manageable.
Who offers loan consolidation
programs?
Please note that as of June 15, 2006, the "Single Holder Rule" mentioned below has been abolished. Students are now free to consolidate with any lender they choose. If you have any questions about your consolidation options, please feel free to call or stop by the Financial Aid Office.
All of the lenders that are listed on the Law Center
's lender chart currently offer consolidation loans.
You may receive mail or telephone solicitations, however,
from other organizations that want to consolidate your
loans. Unless it is your current or prior lender
contacting you, the Financial Aid Office does not condone
these practices nor recommend these consolidators. If you have a question about mail or a telephone call
that you received, contact the financial aid office
for clarification.
Current regulations require that if one lender holds all of
your Federal Stafford Loans, you must consolidate with that
lender, unless that lender does not participate in the Federal
Consolidation Loan Program (Single Holder Rule). If your Federal Stafford Loans are
held by more than one lender, you may choose from any
of the lenders participating in the Federal Consolidation Loan
Program. Federal Stafford Loan borrowers, however, may also
choose to have their loans consolidated through the U.S. Department
of Education Federal Direct Consolidation program.
Each may offer different consolidation options. You
can learn more about consolidation through any lenders
listed on our loan chart or through the Department of
Education by visiting their web sites at:
Total
Higher Education
Access
Group
Student
Loan XPress
Citibank
Department
of Education
How do I qualify and
when can I apply for consolidation?
If you have at least $7500 in federal loans, you are
eligible to consolidate your loans once you are no longer
enrolled as a half-time student. Students who wish to
participate in any of the federal loan consolidation
plans should explore the consolidation options available
to them and complete the consolidation application by June 30, 2006, and contact the various agencies during the
six-month grace period following your graduation. You
must be in your grace period or in repayment and you
cannot be more than 90 days delinquent. General information
is available from the Department of Education by calling
800-557-7392, or by contacting your lender/ servicer
on the loans.
Want to obtain the lowest rate possible? By consolidating
while you are still in your grace period, instead of
after you enter repayment, you could shave off additional
interest. By consolidating when your loans are accruing
interest at the lower interest rate, you could reduce
your rate by as much as .6%.
For example : A 2006 graduate who has taken
all of his loans after August 1998 consolidates in June 2006,
while he is still in his grace period. His consolidation loan
is locked in at a rate of 4.75% for the life of the loan. If
the graduate had waited until December, after he entered repayment,
his consolidation loan would have been locked in at a rate of
5.375% for the life of the loan. Hence, he reduced his interest
rate by .625% for the life of the loan.
The consolidation process can take anywhere from 45
to 60 days from the time you submit your application.
Therefore, our office advises that May graduates submit
their applications starting in the middle of September,
to ensure that they will be able to take advantage of
the in-grace interest rate. (If all of your loans are
with the lender processing your consolidation application,
you may wait until the middle of October to start the
consolidation process.) However, you should be advised
that submitting your application during your grace periods
may result in the loss of some of your grace period
if the consolidation completes rapidly. Once the consolidation
is complete, you are required to begin making payments
and this may be slightly prior to the date you had initially
planned. However, the savings you will reap throughout
the life of the loan will make up for any loss of time
in your grace period.
How many years do I have
to repay a consolidated loan?
Your loan repayment period can be extended up to 30
years depending upon the total amount of loans you have borrowed,
including and federal loans you choose not to consolidate and
any commercial loans you have borrowed.
Please note that with a longer repayment period, you
will be paying more total interest dollars on the loan.
What if I consolidate my loans and later want
to pay my loan off in a shorter period of time?
You can prepay all student loans from lenders on Georgetown Law's lender
list at any time without penalty, including loans that are federally
consolidated. A borrower could utilize lower payments in the
early years of repayment, then make larger payments when financially
able to do so. Prepaying your loans at any time could help save
you interest costs even if relatively small payments of an additional
$25-$50 per month is made.
Should my spouse and I
consolidate our loans together?
Although federal law permits spouses to combine their federal
loans into one larger consolidation loan, the Financial
Aid Office emphatically recommends against this process .
The major drawback is that in the case of divorce, the debt
becomes part of the divorce negotiations - the loans cannot
be separated once they are consolidated.
If you have additional questions about loan consolidation,
you can contact either your lender or the Financial
Aid Office. We would be happy to assist you with any
questions you might have.
Is there a specific timeline I
should follow for consolidation?
May 16
Six month clock starts ticking for May Grads. Prior consolidation loans go into repayment.
June 5
Students consolidating with NorthStar / T.H.E., Access Group, or Student Loan XPress should complete the process by this date.
July 1
New interest rate goes into effect
November - December
Consolidation Loan enters repayment.
February 1
Graduates with Federal Perkins Loans may choose to add these
loans to their consolidation, but should wait until this point
in order to get the maximum use of the interest free grace period.
Contact your consolidation lender for instructions on how to
add these loans.
Are there repayment incentives?
As discussed during the in-person exit interview sessions,
most lenders offer benefits for on-time repayment. Below you
will find a brief description of the offerings of our major
consolidation choices.
NorthStar / T.H.E . - .75% annualized benefit earned while in repayment (beginning immediately upon entering repayment) and less than 60 days delinquent. If borrower goes beyond 60 days delinquent, the benefit is suspended until borrower is less than 60 days delinquent.
Access Group - .25% for selecting direct debit payment
from your checking account. An additional 1% is earned by making
your first 36 consecutive payments on-time.
Effective, June 21, 2005, borrowers who receive either a deferment or forbearance of any type from will NOT be disqualified from receiving the Access OnTime payment incentive. However, the borrower will be required to restart the process and make the necessary consecutive on-time payments (36 months for consolidation loans) after the expiration of the deferment or forbearance to qualify.
Student Loan XPress - .25% for selecting direct debit payment
from your checking account. An additional 1% is earned by making
your first 36 consecutive payments on-time. The 1% incentive
would NOT disappear if a borrower utilizes a forbearance during
the first 36 months as long as the forbearance is requested
prior to the payment due date.
[ back to top ]
This information is believed accurate
at time of distribution and the Georgetown Law Financial Aid Office
encourages its students to investigate their options.
If you have questions, please contact the Georgetown Law Financial
Aid Office at 202-662-9210 or via email at finaid@law.georgetown.edu
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| Interest Rates
Effective July 1, 2006
-
June 30, 2007 |
| 4.7%
in Grace
(and in-school deferment)
5.3% in Repayment
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Be careful with lenders that use telemarketers
and direct mail. Consider their terms carefully
and we urge you not to respond to their sales
tactics. The phone representatives are often on
commission and will receive a benefit with a hasty
decision. |
| Consolidation
Highlights |
Eligible Loans
Consolidation is for FEDERAL student loans. Eligible
loan types include Federal Stafford (Subsidized
and Unsubsidized), Federal Perkins and Federal
SLS Loans.
Types of Consolidation
There are two ways to consolidate; with the federal
Department of Education's Direct Loan Program
or with a Federal Stafford Lender, e.g. Access
Group or Total Higher Education (T.H.E.).
Benefits of Consolidation
-The opportunity to lock-in a low interest rate
for the life of the loan.
-Significantly lower required monthly
payment for the loans.
-Lower payments for federal loans
could allow the borrower to prepay higher cost
commercial loans and credit cards more quickly.
Possible Costs of Consolidation
Although consolidation at the favorable
rates currently in existence will save borrowers
money, there are some costs.
-Consolidation allows the loans
to be paid over a longer period of time. This
can result in a higher total amount of interest
paid if the borrower extends repayment.
-Depending on the speed of the
process, consolidation may start your repayment
slightly earlier than would otherwise occur. If
needed, you can request a deferment or forbearance
from your consolidation lender to delay repayment.
-It is possible that interest rates
could go even lower. The current rates, however,
represent historic lows.
Timing
With consolidation, timing is everything. The
new interest rates go into effect on July 1, 2006 . Before
you consolidate, remember the following timing guidelines:
- Just Right – Start the process NO LATER THAN June 15, 2006 to ensure that your completed signed application is received by the consolidation lender by June 30, 2006.
-
Too Late – If you do not consolidate before June 30, 2006, the interest rate on your loans will increase by over 1.6%. (Based on the 91-day T-Bill as of 3/14/05)
-
Way Too Late – If you do not consolidate while in your six month grace period, your interest rate will likely be over 2.25% higher.
Please note that as of June 15, 2006, the "Single Holder Rule" mentioned below has been abolished. Students are now free to consolidate with any lender they choose. If you have any questions about your consolidation options, please feel free to call or stop by the Financial Aid Office.
Selecting a Consolidation Lender
If you have federal student loans with
more than one lender, you can use any consolidation
lender, otherwise, you must use your current lender (Single Holder rule)..
WARNING:
Be careful with lenders that use telemarketers
and direct mail. Consider their terms carefully
and we urge you not to respond to their sales
tactics. The phone representatives are often on
commission and will receive a benefit with a hasty
decision.
In addition, the Financial Aid
Office has a greater ability to assist you if
you encounter difficulty when using the lender
that you used while attending Gerogetown Law. Several reputable
lenders are listed below. If you have any questions
regarding a specific consolidation lender, please
contact the Financial Aid Office.
- Total Higher Education
(888) 843-3095
www.northstar.org
- U.S. Dept. of Ed. Direct
Loan Program
(800) 557-7392
www.loanconsolidation.ed.gov
Interest Savings
For comparison purposes, we assume that borrowers
fix their interest rate with consolidation and repay their
loans in the original 10 year repayment plan. The approximate
interest savings (versus 20-year historic interest rates)
per $10,000 of loan principal would be:
-$2,820 without utilizing any special repayment
incentives.
-$2,957 using the .25% interest rate reduction
for automatic payment / direct debit from your checking
or savings account.
-$3,230 using Total Higher Education's
(T.H.E.) bonus program (an annualized .75% principal reduction)
for consolidation loans that are paid in a timely manner.
-$3,243 using Access Group's or Student
Loan Xpress's direct debit savings and 1% interest rate
reduction after 36months of on-time payment.
Comparing the Savings
The above savings assume that everything goes
as planned. However, based on anecdotal evidence, only
about 10% of students make it through the longer on-time
payment incentive windows (36-48 months).
Consolidation Procedure
The consolidation process is relatively
simple and most lenders require that you complete
the following basic steps:
-Select your Consolidation lender
and contact them by telephone or web. You will
provide the approximate balance and servicing
information for your current loans.
-You will sign and return a completed
promissory note to your consolidation lender. Some lenders (including T.H.E.) allow you to electronically sign (esign) using your FAFSA pin.
-Your consolidation lender will
"purchase" your federal loans from your current
lender and send you information when the process
is complete.
-You will be required to start
repayment within 30 days of the completion of
the consolidation process.
-If you do not know which lender
holds your federal loans, you may access the National
Student Loan Database at: www.nslds.ed.gov
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