Your Consolidation Questions Answered. . .
1. Why is consolidation important for me right now?
The interest rate on your Federal Direct Loans is variable and is projected to go to approximately 7% on July 1. But you can lock in the low in-school interest rate of 4.75% for the life of your loan if you consolidate your loans with Direct Lending before your last day of final exams in May. If you wait until after your last date of attendance, the rate will increase to 5.375%. Effective July 1, 2006, all consolidation loans will be at 6.8% and the option for a lower in-school rate will be eliminated.
2. What is “consolidation?”
Consolidation is simply refinancing your loan to lock in a favorable interest rate for the life of your loan. Consolidation is a smart way to convert to a lower fixed interest rate and subsequently reduce the cost of borrowing. The interest rate on loans that are NOT consolidated is adjusted on July 1 of every year and can go as high as 8.25%. As recently as June, 2001, the interest rate was 8.19%.
3. Will it really save me money?
If you borrowed $20,000 and you locked in an interest rate of 4.75%, your monthly payment would be $209 and interest paid in a 10 year repayment would total $5,163. At 6.8%, the payment goes to $230 per month, and total interest paid is $7,619. If it reaches the cap of 8.25%, the payment would be $245 per month and interest paid for 10 years would jump to $9,346.
4. Does it matter who I consolidate with?
You’ll receive lots of mail from lenders wanting your business. We suggest that you consolidate only with Direct Lending because they are the only lender who can allow you to retain your grace period and get an interest rate reduction of 0.6% by consolidating while you are still in school.
5. Should I also include my Perkins Loans?
Perkins loans have a fixed interest rate of 5%. You can add the Perkins to your Direct Consolidation Loan, but a weighted average would be calculated for all of your loans. You can view the calculation and the result on the Direct Loan consolidation website (www.loanconsolidation.ed.gov). Perkins borrowers, however, also need to consider the differences in the length of the grace periods between Direct Loans and Perkins Loans, and certain unique deferment and loan forgiveness options available only for Perkins. If you consolidate your Perkins with your Direct Loans, the unique Perkins features would be lost.
6. What if I consolidated last year?
You have the option of either consolidating at 4.75% the loans you have borrowed since you last consolidated, or adding your new loans to your previous consolidation loan, causing the interest rate to be recalculated using a weighted average of the two rates. Again, you can check the costs on the Loan Consolidation website.
7. Are there student loans that cannot be included in Direct Loan consolidation?
Only federally guaranteed loans can be included. These are Direct Loans, Stafford Loans, Perkins Loans and some Health and Human Services Loans (HHS). You are not able to include any private alternative loans, such as CitiAssist or Law Access, for example, or institutional loans offered by Valparaiso University.
8. How long does it take to consolidate?
The consolidation process often takes 30 60 calendar days to complete after you submit your application. Typically, consolidation cannot be completed until loan certification information is received from all loan holders and servicers, including information from schools on Perkins, HHS and other school based loans. If you respond quickly, the consolidation process can be completed in a very short period of time.
9. Will I lose my grace period?
If you are enrolled at least half-time now, you will not lose your grace period, as long as you apply before the last day of this semester and as long as you consolidate with Direct Lending.
If you wait until you are no longer in school at least half-time, or you consolidate with another lender other than Direct Loans, repayment begins when the consolidation process is completed. Therefore, not only will your interest rate be higher but you will have to start repaying earlier. To avoid problems, we advise that you apply immediately.
10. How do I apply for consolidation?
At www.loanconsolidation.ed.gov, you can either apply on-line or download a paper application. We have been advised that you need to use a recent version of Internet Explorer, Netscape or AOL. Mozilla Firefox is not compatible with the consolidation website.
11. How can I obtain more information?
- Web: www.loanconsolidation.ed.gov
- Phone: 1 800 557 7392 (1 800 557 7395 TDD for the hearing impaired)
8AM to 8PM (EST), Monday through Friday
- Mail: U.S. Department of Education
Consolidation Department
P.O. Box 242800
Louisville, KY 40224 2800
When completing your consolidation application, you will be asked for the name and address of your lenders.
For your Direct Loans,
you should enter:
U.S. Department of Education
Direct Loan Servicing Center
PO Box 5609
Greenville, TX 75403
For Perkins Loans:
Finance Office
Valparaiso University
1700 Chapel Drive
Valparaiso, IN 46383 |
- www.dlservicer.ed.gov ~ a direct connection to the Direct Loan Servicing Center, for account balances, payment history, payoff amount, address change, online transactions, repayment estimator and forms for electronic debits and deferments/forbearance.
- www.nslds.ed.gov ~ access to the National Student Loan Data System at which you can view information about the status, amount and lender of all the federal loans you have borrowed.
Note that the previous two sites require your federal PIN Number.
- www.loanlocator.org ~ information about which lending agencies hold your student loans, in case you have borrowed at schools other than Valpo and that are not Direct Lending schools.
- www.pin.ed.gov ~ the site at which you can request a duplicate federal PIN to allow you to access restricted sites and apply for consolidation on-line.
Complete your Consolidation Application
Return to Consolidation Page
Office of Financial Aid
Valparaiso University
Valparaiso, IN 46383
email: finaid@valpo.edu
219.464.5015
Toll-Free:
1.888.GO.VALPO
(1.888.468.2576)
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