What is student loan consolidation?

Understanding student loan consolidation

Student loans are great resources for assisting with tuition payments, accommodations, books, and living fees associated with higher education. Once that diploma is in your hand, however, graduates are often faced with a long list of student loans to repay, all with varying interest rates and payment terms.

For many students, the option at this point is to start comparing student loan consolidation options. Before doing this, however, it’s best to fully understand what student loan consolidation actually is and what it means to you financially.

The Higher Education Act (HEA) is a loan consolidation program under both the Federal Family Education Loan (FFEL) and Direct Loans. With these programs, the graduate’s college loans are combined into one new loan. People often choose to consolidate student loans because of lower interest rates along with the possibility of a longer repayment period. The result is usually a more manageable repayment schedule, which makes borrowers less likely to default.

It’s important to note that only the following student loans are eligible for consolidation:

• Federal Family Education (FFEL) Loans
• Federal Perkins Loans
• Health related education loans
• Loans made under the FFEL PLUS program

It can get confusing, but just remember that only the Direct Loan program may consolidate Direct Loans. Likewise, not all FFEL consolidation lenders will include non-FFEL loans. If you’re confused and need more help, check with your university or college registrar or bursar. They should be able to get you pointed in the right direction.