KSU Student Financial Aid: Loan Consolidation

On July 1, 2006 interest rates on Federal Direct Student loans (subsidized and unsubsidized) will increase from the current 4.7% to 6.8%. This increase is one of the largest single-year increases in the 40-year history of the federal student loan program. Students and former students who have outstanding federal Stafford loans should consider consolidating their variable rate loans, whether the loans are Federal Family Education Loans or Federal Direct Loans. According to the Congressional Budget Office, federal student loan interest rates are projected to rise this July and remain at that level each July in the near future. Further changes in the law will take effect on July 1, 2006. These changes will limit the option of loan consolidation for student borrowers in the future. Review the Frequently Asked Questions below for more information on loan consolidation.

Who is sending me information about loan consolidation?
Lenders and servicing agencies want you to have the opportunity to save money on the repayment options of your federal student loans by locking in a fixed rate. If a company is consolidating federal student loans, they must comply with the federal regulations as mandated by the US Department of Education. The Student Financial Aid Office does not recommend any one program over another. We do encourage you to research your options, allowing you to make an informed decision prior to consolidating your loans.

What can I consolidate?
The Federal Student Loan Consolidation program allows students to combine any of their federal student loans (Perkins, Nursing, Subsidized, Unsubsidized) into one new loan. It would create one new loan with its own interest rates, repayment options/incentives, applicable benefits or fees.

The Federal Parent Loan for Undergraduate Students (PLUS) Consolidation program allows parent borrowers to combine multiple PLUS loans into one new loan, even if the various PLUS loans are for multiple students.

How can I find out what loans I have?
The National Student Loan Database System (NSLDS) lists all of your federal student loans. You can also find out who the lender/servicer is, how to contact them, how much you borrowed, when you borrowed, where you borrowed (what school) and the type of the loan. You will need your Department of Education PIN to access your personal information. If you don't have your PIN, you may request a duplicate at www.pin.ed.gov. The Web address for NSLDS is, www.nslds.ed.gov.

What else do I need to think about, if I want to consolidate?
You will want to consider what the consolidation will do to your repayment status, grace periods and deferment options. You may lose some repayment benefits or options if you consolidate Perkins and Nursing Loans with your Direct Loans. If you chose not to consolidate your student loans, your Direct Loans will continue to have a variable interest rate, adjusted yearly, with a cap of 8.25%.

As a PLUS borrower, if you chose not to consolidate at this time, your PLUS loans will continue to have a variable interest rate, adjusted yearly, with a cap of 9%.

You cannot consolidate PLUS loans with student loans and you cannot consolidate student loans with the PLUS loan.

Where can I get more information about loan consolidation?
The Student Financial Aid Office recommends one website to visit. This site is not affiliated with any specific lender or agency and will be able to provide an unbiased view of the options that may be available to you, http://www.finaid.org/loans/consolidation.phtml .

If you are interested in consolidating with the Direct Loan program, their website is, http://www.loanconsolidation.ed.gov, or call 800-557-7392.