Federal Consolidation FAQs

Frequently Asked Questions
What is a Federal Consolidation Loan?
Should I consolidate my loans?
Who is eligible to consolidate loans?
Which loans can I consolidate?
How do I find out what loans I have?
What are the terms of the Federal Consolidation Loan?
How can you determine what your rates will be?
What other options do I have to reducing my payment other than consolidation?
Will I only have one Consolidation Loan?
If I have a Consolidation Loan, can I reconsolidate?
Do I lose my deferment and forbearance options if I consolidate?
When should I apply?
Are there any fees charged to consolidate?
Are there repayment incentives if I borrow through Key?
How long does it take to get a consolidation loan?
While I'm waiting for my loans to be consolidated do I continue to pay on my old loans?
1. What is a Federal Consolidation Loan?
A Federal Consolidation Loan is a loan available to a borrower who wants to combine his or her outstanding education loans into a single loan with a single monthly payment. In most cases, the borrower is responsible for paying to the lender the interest that accrues on the loan until the loan is paid in full. Consolidation loans usually have a longer repayment period and a lower monthly payment than is available on the underlying education loans.
2. Should I consolidate my loans?
If you are looking for long-term relief to high monthly payments, consolidation may be the correct option for you. Use this calculator to determine what your new monthly payment would be and if you would be paying more over the life of the loan.
If you are unemployed - contact your lender about an unemployment deferment. This may give you some short-term financial relief while you review your long-term repayment options such as consolidation. If you are having trouble making payments for other reasons, contact your lender before you consolidate. There may be other deferment options or even forbearances you can take advantage of that don't require consolidation.
There are disadvantages to a Consolidation Loan as well. Because you are making a lower monthly over a longer period of time, the total amount you repay will probably be more than the original payback amount.
3. Who is eligible to consolidate loans?
If any Title IV loans (Stafford, PLUS, Perkins) being considered for consolidation are in default, the borrower must either make satisfactory repayment arrangements with the holder of each defaulted loan or agree to repay the consolidating lender under an income-sensitive repayment schedule
You must agree to notify your lender of any address changes
4. Which loans can I consolidate?
FFELP loans (Stafford, PLUS, SLS, and Consolidation loans)
FDLP loans (Stafford, PLUS, and Consolidation loans)
FISL loans
Perkins Loans
Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)
Nursing Student Loans (NSL)
Health Education Assistance Loans (HEAL)
5. How do I find out what loans I have?
Locate your student loans.
6. What are the terms of the Federal Consolidation Loan?
Your outstanding loan debt determines the maximum repayment term of your Federal Consolidation loan. You can refer to the chart below to see how the total amount of debt you are consolidating extends the length of the repayment term.
Loan Amount Maximum Term
$10,000 - $19,999 15 years
$20,000 - $39,999 20 years
$40,000 - $59,999 25 years
$60,000 or more 30 years

The interest rate for the Federal Consolidation Loan is based on the weighted average of the interest rate on the loans you want to consolidate, rounded to the next higher 1/8 of 1%, capped at 8.25%.
7. How can you determine what your rates will be?
Calculate a repayment schedule, which will help you determine what your rates will be. Be sure to have a list of the loans you want to consolidate and their current rates.
8. What other options do I have to reducing my payment other than consolidation?
You can always contact your lender to inquire about changing your payment plan. Most lenders offer graduated, income sensitive and extended repayment plans.
9. Will I only have one consolidation loan?
You will only make one payment with one check to one mailing address. From a system standpoint you may have more than one loan as lenders track your subsidized and unsubsidized loans separately.
10. If I have a consolidation loan, can I reconsolidate?
Yes, if certain criteria are met:
If you have a previous Federal Consolidation Loan but you want to reconsolidate again, you may do so as long as you have at least one federal loan not included in your original consolidation, or as long as your spouse has a separate federal loan or federal consolidation loan, either of which you plan to now consolidate. Please contact a loan specialist to determine what your new interest rate will be. We must use your consolidation interest rate in order to calculate the new rate.
11. Do I lose my deferment and forbearance options if I consolidate?
No. The Federal Consolidation Loan has deferment and forbearance options. The three most common deferments are:
Returning to school at least half time
Unemployment
Economic Hardship
Contact your lender for a complete list of options available to you.
12. When should I apply?
There are a number of issues to consider including:
Grace Period
The loans you wish to consolidate must be in the grace period or repayment status to be included; you may save money if your loans are in their grace period (the 6 months immediately after you withdraw, graduate or drop below half-time) because for loans made after July 1, 1995 loans have a lower rate during grace than repayment
Remember that while Stafford loans have a grace period, consolidation loans do not; you will begin to make payments within 60 days of your loans being consolidated
If you are unemployed or need to accrue savings during the grace period, it may be more beneficial to wait until after your grace period expires
The difference in between the grace period rate and the repayment rate is .6%
Rate Changes
Interest rates for the Federal Loan programs (Stafford and PLUS) change every July 1st; depending on the rate environment you may want to consolidate before or after that date in order to obtain a lower rate
You can refer to websites such as the Wall Street Journal or Bloomberg to read up on if rates may be moving higher or lower
13. Are there any fees charged to consolidate?
No.