Consolidation is taking out a new Student
Loan to pay off existing Student Loans.
Here are some factors you should consider when deciding if consolidation
is right for you:
- What are the interest rates on your loans? The interest rate for direct loans disbursed between July 1, 1998, and June 30, 2006, will continue to be adjusted each year on July 1, though for Stafford loans it will never be higher than 8.25%. However, Stafford loans disbursed on or after July 1, 2006, have a fixed interest rate of 6.8%, with the exception that subsidized loans disbursed on or after July 1, 2008, to undergraduate students will have an interest rate of 6.00%. The Perkins Loan has a fixed 5% interest rate. You may want
to consolidate, if the consolidation interest rate is lower than your
current interest rate. The consolidation interest rate will be fixed
for the entire repayment period.
- Are your monthly payments manageable? If your are
having trouble making your monthly payments or have exhausted your deferment
and forbearance options and want to avoid default, consolidation may
- How much are you willing to pay over the long-term? Like
a home mortgage or car loan, extending the years of repayment increases
the total amount you repay.
- How many payments do you have left on your loans? If
you are close to paying off your student loans, it may not be worth
the time and effort to consolidate or extend payments.
- How do you benefit? You have only one lender and
one monthly payment. You may also have a lower interest rate. The consolidation
interest rate is a fixed interest rate, which means the interest rate
will stay the same throughout the repayment period.
- Will you lose any of your existing benefits? Check
with your lender to confirm that you will not lose deferment or cancellation
benefits if you consolidate.
- What loans can you consolidate? Most federal education
loans are eligible for consolidation. Guaranteed Student Loans, Direct
Subsidized and Unsubsidized Loans and Perkins Loans are most commonly
consolidated by UMD students. SELF, University Trust Fund, Alternative,
Ordean & Primary Care loans are not eligible for consolidation.
For a complete list click on the link below.
- Who should you consolidate with? You can choose any
institution you wish, but for convenience the link below will bring
you to a list of institutions that other UMD student loan borrowers
have commonly used to consolidate their loans. UMD, in no way, recommends
one consolidation firm over another, nor has it intentionally left out
any specific company.
Loans Eligible and Ineligible for Consolidation
Loan Consolidation Institutions