Consolidation FAQs

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If you would like to apply for a consolidation loan, you may contact your lender or servicer (i.e. American Education Services) directly or visit our helpful links page for more information.

Loan Locator – Where are my Student Loans?

Click here to find out who your primary contact for federal loan consolidation is.

Consolidation PowerPoint

Click here to view a power point presentation provided by American Education Services (AES), your loan guarantor and servicer. Learn additional facts, pros and cons, and contact information on federal loan consolidation. This was presented to students April 18th. For additional information, please contact the AES Network Consolidation Center at 800-338-5000 or visit their website at

Why should I consolidate my education loans?

Consolidation allows you to lower your monthly payment by lengthening the repayment period beyond the standard 10-year payback schedule. Depending on the amount of your education debts, you can extend your payback period up to 30 years and significantly reduce your monthly payment. However, be aware that extending the term of your loan will increase your total interest costs, so you should explore your options.

  • If your loans are with different lenders or loan servicers, loan consolidation will eliminate the need to make multiple monthly payments.
  • Stafford subsidized and unsubsidized loans carry a variable interest rate that is adjusted annually. Consolidation loans carry rates that are fixed for the life of the loan.
  • For borrowers submitting a consolidation application during their grace period, the interest rate for the Consolidation loan will be based on the in-grace rate, which can be up to .6 percent lower than the interest rate during repayment for Stafford loans first disbursed on or after July 1, 1995. Thus, consolidating in grace can significantly reduce interest costs.

Are there any disadvantages to loan consolidation?

Consolidation can significantly increase your total interest costs, because you'll be making smaller installments over a longer period of time. Depending on the loan balance and interest rate, consolidation can double or triple your total interest expenses. It is advisable to accelerate payments whenever possible.

When do interest rates on the Federal Stafford Loan change?

Fixed interest rates for loans first disbursed on or after July 1, 2006; Stafford loans are 6.8%. Variable interest rate for loans first disbursed prior to July 1, 2006; changes every July 1st. It is set to the 91-day T-bill + 1.7%, with a cap of 8.25%.

Can I consolidate my Federal loans with any lender or consolidation company I want?

Yes. Effective June 15, 2006, the single holder rule was eliminated. You will now have a wide variety of choices and will need to carefully consider all options and implications.

Am I eligible for a Consolidation loan?

To receive a Consolidation loan, you must meet the following criteria:

  • If you are a student borrower, your loans must be eligible for consolidation, which means they must be in grace, repayment, deferment or forbearance. When you reduce your enrollment to less than half time, you automatically enter the six-month, post-school grace period. At most academic institutions, students are considered to be enrolled half-time if they are taking six or more credit hours during the semester.
  • You must be in the six-month, post-school grace period or in repayment. If you consolidate at this time, your grace period will be canceled when the Federal Consolidation loan is issued. You will be required to begin making payments on your loan within 60 days. For some borrowers, consolidation during the grace period can be an advantage. The consolidation interest rate will be calculated by using the grace interest rate, which can be up to .6 percent lower than the repayment interest rate. Borrowers may apply for consolidation while still in grace and still maintain their grace period benefits. If instructed by the borrower, your application will be held and disbursement scheduled on a date near the end of the grace period
  • If you are a parent borrower, you may consolidate your loans at any time, regardless of your child's enrollment status. Your loans must be fully disbursed in order to be eligible for consolidation.
  • You must certify that you do not have another application for a Consolidation loan pending with another lender.

Can my spouse and I consolidate our education loans?

No. Spousal consolidation loans are no longer available.

Can I include Federal Direct Loans in my guaranteed Consolidation loan?

Yes. Borrowers may consolidate direct loans under a guaranteed Consolidation loan issued by a private lender.

Can I consolidate defaulted loans?

Lenders and loan servicers must follow special rules in determining whether borrows can consolidate any defaulted loans. For details, contact your lender or loan servicer.

What loans are eligible for consolidation?

Guaranteed Consolidation loans may include one or more of the following loans:

  • Federal Subsidized and Unsubsidized Stafford loans
  • Direct Subsidized and Unsubsidized Stafford loans
  • Federal PLUS loans
  • Federal Direct PLUS loans
  • Federal Supplementary Loans for Students
  • Federal Perkins loans
  • Federal Nursing Student Loans (NSLs)
  • Health Professions Student Loans (HPSLs)
  • Health Education Assistance Loans (HEALs)
  • Consolidation loans
  • Federal Direct Consolidation loans

What loans cannot be consolidated?

You may not include private loans you received from banks, credit unions, thrift institutions (savings and loan associations), your parents, or other individuals. Loans issued by colleges also are not eligible. You cannot use Consolidation loans to finance other types of personal debt, including credit card balances and car loans.

Can I add loans to a Consolidation loan after it has been issued?

Yes. You can add one or more eligible existing or new loans to the consolidation no later then 180 days following the issue date of the Consolidation loan.

In addition, you may also reconsolidate your existing consolidation loan with any eligible loans that were left out of the earlier consolidation.

What happens next?

Your lender will process your loan application and contact your other student loan lenders to determine the total loan balance, maximum repayment period, and interest rate for the new loan. When the paperwork is completed, the lender pays off your old loans and issues the new Consolidation loan.

Is there an application fee or prepayment penalty?

No. By law, lenders may not charge an application fee for a Consolidation loan. You cannot be charged a fee by the loan's guarantor. Current federal law also forbids lenders from charging prepayment penalties on federal education loans.

Is a credit check required?


After I submit my Consolidation loan Application, will I still have to make payments on the old loans?

Yes! Until you have been notified that the consolidation has been completed, you are required to make regular monthly payments unless other arrangements are made. This is true for all student loan borrowers, including defaulted borrowers who are making payments to a collection agency.

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