FAQ's
What is a Federal Consolidation Loan?
A Federal Consolidation is a FREE federal loan offered through the FFEL Program. The Federal Consolidation Loan is an added benefit of Federal Student Aid. The Federal Consolidation Loan is a combination of all of one’s student debt consolidated into one simple payment.
Why should people consolidate their federal student loans?
People consolidate their federal student loans to reduce their monthly payment up to 60% and fix their interest rate, so they are no longer affected by fluctuating interest rates.
What are the advantages of consolidating your student loans?
- You can reduce your monthly payment up to 60%
- Fixed Interest Rate
- FREE Federal Program
- Retain ALL Federal Rights
- Refresh your deferment and forbearance rights, for a total of six more years of non-payment
- Interest may be Tax Deductible
- NO Prepayment Penalty
- Everything you pay over your monthly payment is applied directly to principle
How do I know if I am eligible for a PCFS consolidation loan?
You are eligible for a consolidation loan if you meet the following requirements:
- You have over $50,000 in student loan debt
- You have not previously consolidated your student loans, OR you consolidated your loans and took new loans out, OR you consolidated your loans and left one or more out, like a Perkins loan
- If you are not in default on any of your student
Are there any fees/charges for consolidating my student loans?
There are NO fees for consolidating your student loans. This is a FREE federal program.
Do I still receive the same federal benefits?
Yes! Student loan consolidation is a federal program; therefore you are still entitled to benefits such as deferment, forbearance, and tax deductible interest. Student consolidation loans are also government guaranteed and federally insured. You still have the same payment options: Graduated, Standard, Extended, and Income Sensitive.
Is my new interest rate for my consolidation loan fixed or variable?
The interest rate on your consolidation loan is fixed. The fixed interest rate of your consolidation loan is based on the weighted average of the interest rates of the loans you consolidate (rounded up to the nearest 1/8th percent).
How is my new interest rate calculated for my consolidation loan?
The interest rate for your federal student loan is calculated by taking the weighted average of your variable interest rate and loan balances and rounding it up to the nearest 1/8 of 1% and fixing it at the new interest rate. This federal consolidation calculation is regulated by the U.S. Department of Education. Here’s an example below:
Step 1
| Outstanding Balance | Interest Rate | Calculation |
|---|---|---|
| $5,500 | 6% | $5,500 x .06 = $330 |
| $7,500 | 3% | $7,500 x .03 = $225 |
| $3,300 | 8% | $3,300 x .08 = $264 |
| $16,300 (Total Combined Balance) | (Total of Calculations) $822 |
Step 2:
Divide the total combined balance of all loans by the sum of the calculations
$822 / $16,300 = .05042 or 5.042%
Step 3:
Round the results of step 2 to the nearest 1/8 of 1% (.125%)
5.042% is rounded to 5.125%
Your Fixed Interest Rate:
5.125% is your NEW weighted average interest rate for your consolidation loan.
What are my current interest rates?
Depending on when you took out and the current status of your loans, the rates are as follows:
| LOAN TYPE | LOAN STATUS | CURRENT RATE (07-08) | OLD RATE (06-07) | OLD RATE (05-06) | OLD RATE (04-05) |
|---|---|---|---|---|---|
| STAFFORD LOANS ON OR AFTER JULY 1ST 2006 | ALL STATUS 6.80% Fixed | 6.80% Fixed | N/A | N/A | |
| STAFORD LOANS ON OR AFTER JULY 1ST ’98 TO JUNE 30TH 2006 | IN SCHOOL, IN GRACE, DEFFERED | 6.62% Variable | 6.54% Variable | 4.70% Variable | 2.77% Variable |
| STAFORD LOANS ON OR AFTER JULY 1ST ’98 TO JUNE 30TH 2006 | REPAYMENT OR FORBEARANCE | 7.22% Variable | 7.14% Variable | 5.30% Variable | 3.37% Variable |
| STAFORD LOANS BEFORE JULY 1ST ‘98 | IN SCHOOL, IN GRACE, DEFFERED | 7.42% Variable | 7.34% Variable | 5.50% Variable | 3.57% Variable |
| STAFORD LOANS BEFORE JULY 1ST ‘98 | REPAYMENT OR FORBEARANCE | 8.02% Variable | 7.94% | 6.10% | 4.17% |
| GRADUATE PLUS OR PARENT PLUS LOANS ON OR AFTER JULY 1ST 2006 | ANY | 8.50% Fixed | 8.50% Fixed | N/A | N/A |
| GRADUATE PLUS OR PARENT PLUS LOANS | ANY | 8.02% Variable | 7.94% Variable | 6.10% Variable | 4.17% Variable |
Do I have to pay prepayment penalties?
There is NO prepayment penalty. Every penny you pay over your monthly payment is applied directly towards the principal of the loan. So, a modest overpayment each month can take years off of your payment plan.
Am I able to refinance a consolidation loan?
The U.S. Department of Education does not allow a borrower to refinance a consolidation loan without making any additions to the original loan. If you have additional federal loans that were not included in the original consolidation loan, then you can add those loans and recalculate the loan into a new Federal Consolidation loan, or if you go back to school and receive new loans.
Can I include my private loans into my Federal Consolidation loan?
Private loans are not eligible for the FFELP Consolidation loan.
How long will it take to consolidate my loans?
It only takes forty-five to sixty days for your Consolidation Loan to process once your application information is received. You'll receive a new Loan Consolidation Disclosure Statement and Repayment Schedule from your loan servicer once processing is complete.
Is there an application fee or credit check required to consolidate?
No. By law, lenders may not charge an application fee or perform a credit check under a Federal Consolidation Loan program.
When does repayment begin?
You are required to begin repayment on your Consolidation Loan within 30 days of its funding date. Once your loan has been funded, you will receive a Loan Consolidation Disclosure Statement and Repayment Schedule from the servicer of your new loan.
What if I want to make more than the minimum loan payment each month?
You have the flexibility to shorten your overall loan term and decrease your interest costs by increasing your monthly payments. When you do this, that extra money you send in each month is applied directly towards the principal balance of your new fixed interest rate loan, thereby allowing you to save on interest costs and pay your loan off faster.
How long is the payback period for a Consolidation Loan?
Your new loan repayment term is based on the total amount of your outstanding student loan debt - not just the amount you have chosen to consolidate (unless they happen to be the same), and stretches your repayment term from the standard 10 year payback schedule up to 30 years.
What are my deferment benefits?
Under certain circumstances, you have a right to defer (postpone) repayment of your new loan. The types of deferments that are available depend on when you obtained your Consolidation Loan. If you consolidate all of your eligible FFELP loans, deferments are generally available while you are:
- Enrolled at least half time at an eligible school;
- Engaged in a full time course of study in a graduate fellowship program;
- Engaged in a full time rehabilitation training program for individuals with disabilities (if the program is approved by the Department of Education);
- Conscientiously seeking, but unable to find, full-time employment; or
- Experiencing an economic hardship as determined by federal law, including service as a Peace Corps volunteer.
What are my forbearance options?
Forbearance temporarily delays or reduces your loan payments; however interest charges continue to accrue. Under Federal regulations your lender/servicer is generally not required to grant forbearance and may require you to provide reasons for the request and other information. Your lender/servicer may grant a forbearance to eliminate a delinquency that persists even though you are making scheduled installment payments, or may grant and administrative forbearance for up to 60 days in order to collect and process documentation supporting your request for a deferment, forbearance, or change in repayment plan. The following circumstances require your lender/servicer to grant you forbearance:
- Financial hardship
- Illness
- Serving in a medical or dental internship or residency program (if you meet certain criteria)
- Serving in a national service position for which you received a national service education award under the National and Community Service Trust Act of 1993;
- Qualifying for partial repayment of your loans under the Student Loan Repayment Program, as administered by the Department of Defense; or
- If you have a monthly debt burden for Title IV loans that collectively equals or exceeds 20% of your total monthly gross income.
Should I continue payment on the student loans that I am consolidating while my application is processing?
Yes. It is extremely important to continue to make all of your regular payments on the loans that you have selected to consolidate until you receive your new Loan Consolidation Disclosure Statement and Repayment schedule from your new loan servicer.
Can I add loans to my Consolidation Loan after it has been processed?
Yes. You have 180 days after your Consolidation Loan's funding date to add additional eligible loans to your consolidation loan. To add a loan, contact your new loan servicer.
What is the grace period discount?
If you consolidate your Federally Guaranteed Student loans while you are in your grace period, you will retain the .6% interest rate reduction that would, otherwise, expire when you go into repayment status. This discount is only good for loans taken out before July 1st, 1998.