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Loan Consolidation

The Higher Education Reauthorization Amendments of 1986 reinstated educational loan consolidation. The Higher Education Reauthorization Amendments of 1992 now makes it possible for students who are delinquent or in default to consolidate loans. Also, married couples were able to consolidate loans as long as they agree to be jointly and severally liable for repayment. In the student loan legislation of 2007, the ability to consolidate loans as a married couple was eliminated. Further, the only consolidating agency left is the Federal Government through Direct Loans. Loan consolidation between borrowers and lenders has virtually disappeared.

To qualify for loan consolidation, the student must:

  • have a minimum indebtedness of $7,500,
  • be in his/her repayment or grace period, and
  • if in repayment, not be delinquent by more than 90 days.

Educational loans that may be included in consolidation are:

  • Federal Stafford Loans (Subsidized and Unsubsidized),
  • Federal Graduate PLUS Loans,
  • Federal Perkins Student Loans, and
  • Loans to Disadvantaged Students (LDS).

The interest rate under consolidation will be fixed using the weighted average of all interest rates consolidated plus 1/8 percent. Repayment will vary from 12 to 30 years depending upon the amount outstanding in other, non-consolidated loans. Graduated repayments as well as equal installments will be offered as part of loan consolidation.

Private loans like the Residency Interviewing & Relocation Loan cannot be consolidated with the Federal Loan Consolidation Program.

For more information, go to federal direct loan website.