Q. What is considered a federal consolidation loan?
A federal consolidation loan provides the borrower of federal educational loans the ability to combine all existing loans into one convenient payment.
Consolidation loans are amortized up to a 30 year period determined by the total loan indebtedness.
Borrowers can reduce their minimum monthly payment requirements up to as much as 65%.
Q. Why should I consolidate?
The following are various reasons why you should take advantage of consolidating your educational loans:
- By placing all your loans into one loan, you have available to you the convenience of making one minimum monthly payment with a locked-in interest rate for the life of the loan.
- The advantage of a smaller monthly payment allows you to have greater control over your money and the ability to have greater flexibility when projecting your monthly budget.
- The majority of federal educational loan programs have variable interest rates. Presently, interest rates are at the lowest rate possible. By consolidating your student loans now, you can receive the lowest Interest Rate possible as well as take advantage of a fixed, locked-in low interest rate for the life of the loan with respect to the new consolidation loan. By locking-in your rate, over the course of repayment you will save thousands of dollars in interest expenses.
Q. Will consolidation adversely affect my credit score?
Consolidation has no adverse effect regarding your credit. In fact, consolidation helps a your credit. It lowers your debt-to-income ratio, therefore lowering your overall monthly payment, which ultimately improves your overall monthly cash flow.
Q. Are there any prepayment penalties?
There is a No Prepayment Penalty feature on all existing Federal student loans.
The benefit is that you can accelerate your monthly payments and ultimately payoff your loan debt early.
Gulf Coast Financial Associates, LLC. will assist you with planning an appropriate monthly payment plan that will pay off your educational debt in a specified amount of time.
By electing this option, you can save hundreds, if not thousands, of dollars in the process.
Q. Am I eligible to consolidate my loans?
Obtaining a consolidation loan is simple but you must meet certain requirements
1. You must no longer be in school for the loans that you wish to consolidate,
2. You must have $10,000 or more in eligible federal loan debt.
Q. What loans are eligible to consolidate?
Federal Stafford Loans and Federal Direct Stafford Loans,
Federal Consolidation Loans and Federal Direct Consolidation Loans,
PLUS (Parent Loans for Undergraduate Students), and Federal Direct PLUS loans,
Federal Perkins Loans,
NSL (Nursing Student Loans),
SLS (Supplemental Loans for Students),
HPSL (Health Professional Student Loans),
HEAL (Health Education Assistance Loans), and Graduate PLUS Loans.
Q. If one of my loans is defaulted, can I still consolidate?
Yes, you can still consolidate, but the loan(s) that are in default cannot be consolidated.
You need to set up terms with your guarantor to make satisfactory payments. Once those are met and your loan(s) are out of default you can
either add them onto your existing consolidation loan if within 180 days of disbursement or re-consolidate all loans together.
Q. My parent has PLUS loans for me. Can I consolidate those in my consolidation?
Unfortunately those loans cannot be consolidated with your consolidation loan since they are under your parentsī name.
Your parents however, are eligible to consolidate them.
Q. Can my spouse and I consolidate our loans together?
No. As of the changes enacted in 2005, Spousal Consolidations are no longer permitted.
Q. Once I apply do I still need to make payments on my old loans?
Yes. You will need to continue to make payments on your loans until you receive information that your
new consolidation loan has been funded.
Q. Can I add loans to my consolidation loan?
Yes. You can add new or existing loans to your consolidation as long as it is within 180 days of the
initial consolidation loan. If after 180 days, you will need to re-consolidate together by filling out a new application.
Q. How is my interest rate determined?
Federal Consolidation Loan interest rates are determined by taking the weighted average of the
interest rates of all the loans being consolidated and rounding up to the nearest 1/8th%. The interest rate will never exceed 8.25%.
Q. Do I keep my deferment and forbearance time?
Yes, by consolidating your loans it creates a new loan, therefore resetting your deferment and forbearance eligibility.
Q. What are the repayment plans that I can choose from?
There are four types of repayment options. There are no prepayment penalties for any of these options.
- Standard Payments This is the most common method and provides for a fixed monthly payment throughout the life of your loan.
- Graduated Payments This option gives you a smaller payment in the beginning of repayment and gradually increases in stages
over the course of the repayment period of the loan. This option is best for those that begin working at a low rate but expect their income to rise
significantly in the future.
- Income sensitive With this option, the amount of your payments will be adjusted annually based on your expected total monthly
gross income. Payments may increase or decrease.
You will be asked to submit information to assist in determining your new payment which is updated annually.
- Extended payments With this option you may repay over a 25-year period on a fixed or graduated payment plan if you have loans
totaling between $30,000 and $39,999. Under the other repayment options available in the consolidation program, you must have at least $40,000
in debt to qualify for a 25-year repayment period.
This plan does not work for those with over $40,000 in student loan debt.
