How Student Loan Consolidation Works

How long does it take to process a Consolidation loan?
It typically takes four to six weeks, although many loans can be completed in two to four weeks or can take as long as 12 weeks.

How long will I have to repay a Consolidation loan?
The term of the Consolidation loan will depend on what the principal balances of your loans are at the time they are consolidated. The higher the balance, the longer the term. The minimum repayment term is 10 years and the maximum is 30 years. The minimum monthly payment is $50; therefore, if you have a low principal balance, your loan may pay off in under 10 years. There is no penalty for paying your loan off early.

Can I consolidate a defaulted loan?
Loans that have defaulted may be eligible for consolidation as long as certain criteria are met, which are:

  • The holder of the defaulted loan must certify you have made satisfactory payment arrangements on the loan(s). Satisfactory payment arrangements, at a minimum, consist of three full, consecutive, voluntary, on-time payments prior to applying for a Consolidation loan.
  • The defaulted loan cannot be subject to a judgment or an order of administrative wage garnishment.
  • If there is a judgment or garnishment on the loan, the judgment must be vacated or the garnishment order must be lifted for those loans to qualify for consolidation.

What will my interest rate be?
The interest rate on your Consolidation loan is set according to federal law; it is the weighted average of the interest rates of loans being consolidated, excluding Health Education Assistance Loans (HEAL’s), rounded up to the nearest one-eight percent. The rate is fixed for the life of the loan and cannot exceed 8.25%.

What is a weighted average?
The weighted average is determined by the current balance and the current interest rate of each loan that is being consolidated. The higher the balance, the greater “weight” is placed on the interest rate of that loan.

How can I benefit from consolidating my student loans?
Depending on your loan balance, you may have a longer term to pay off your Consolidation loan, which could decrease your monthly payment to a more manageable amount. Keep in mind, the longer it takes to repay your loans, the total interest costs will increase.

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