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Kalamazoo College Financial Aid
information for current students and their parents
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Consolidation Issues
If you are not a recent grad or going to be graduating in the next term or two, there is no need to read further since consolidation is no longer allowed for students who are still in school.
With the big push to consolidate prior to July 1, 2006; many of our students have already consolidated most of their loans to a lower interest rate. If you do not know if you consolidated, check your account at Direct Loan Servicing Online. This site will provide you with all your Stafford Loan information.
Loans prior to July 1, 2006 were variable rate loans and if you consolidated prior to July 1, 2006, there is no reason for you to consider consolidation again because Stafford Loans after July 1, 2006 were given at a fixed rate.
Students who did not consolidate their variable interest rate loans may want to consider consolidation, but it’s not for everybody.
Given that interest rates have not changed much, and a borrower with $20,000 of Stafford Loan debt will only see a monthly increase of less than $1 per month, the main consideration for students considering consolidation is keeping their grace period for as long as possible.
Since borrowers can no longer consolidate during the in-school period, the only option for locking in the lower in-school rate is to consolidate during the six month grace period. You may lose out on some of your grace period because you will need to begin repayment within 60 days of consolidating. You can ask your lender to set up your consolidation loan so that it doesn’t start until close to the last two months of your grace period.
Another change is that if you consolidate your Federal Perkins Loans with your Stafford Loans, it will now become part of a Direct Unsubsidized Consolidation Loan. A Direct Unsubsidized Consolidation Loan borrower is charged interest on the loan during all periods, including deferment periods. This change will be implemented effective with Direct Consolidation Loans made on or after September 10, 2007.
Consolidation will lower your monthly payments by extending your repayment term, but doing this can greatly increase the amount of interest you’ll pay. Changing your repayment term from 10 years to 20 years will cut your monthly payment by a third, but you’ll double the amount of interest you pay in the long run.
No matter what you decide about consolidation, don’t forget to use direct payment to decrease your interest rate by 0.25%. This also can help keep you from ever being late on a payment as you can request it be paid automatically each month from your account.
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