What is Consolidation
A loan consolidation in its’ simplest form is taking out one large loan to payoff various small loans. If your loans have different interest rate, your new rate will be calculated by using a weighted average. See Table Below
| Loan | Balance | Interest rate | Weighted Average* |
| 1 | $3,000 | 5.95% | 30% |
| 2 | $5,000 | 7.95% | 50% |
| 3 | $2,000 | 5.55% | 20% |
| Consolidated | $10,000 | 6.87%* | |
*The weighted average is calculated by dividing the loan balance by the new loan so 3,000/10,000 = 30%
*The new interest rate would be 5.95% multiplied by 0.30 + 7.95% multiplied by 0.5 + 5.55% multiplied by 0.20
Benefit of Consolidating
The greatest benefit of loan consolidation is only having to make one monthly payment. If you have three loans you will have to send three different payments, most likely due at different times of the month. This can get confusing and could result in late payment fees.
Don't Consolidate Before Graduation
If you consolidate your loans before you graduate you will most likely lose your grace period and have to begin making payments as soon as you graduate. Most student loans have at least a 6 month grace period or even longer. So before you consolidate you may want to have already exhausted your grace period.
Getting Started
The best way to consolidate your loans is first find a consolidator; you can look on the right hand side of this blog for relative links if you see no loan consolidating services try searching with the search box below. After you find a lender, your next step is filling out an application and then wait for approval. After you are approved your lender will contact you with further actions required or in some cases handle the transactions on your behalf.
Search For Student Loan Consolidating
Here is a list of the types of loans you can consolidate
Subsidized Loans:
• Subsidized Federal Stafford Loans
• Direct Subsidized Loans
• Subsidized Federal Consolidation Loans
• Direct Subsidized Consolidation Loans
• Federal Insured Student Loans (FISL)
• Guaranteed Student Loans (GSL)
Unsubsidized Loans:
• Unsubsidized and Nonsubsidized Federal Stafford Loans
• Direct Unsubsidized Loans, including Direct Unsubsidized Loans (TEACH)
(converted from TEACH Grants)
• Unsubsidized Federal Consolidation Loans
• Direct Unsubsidized Consolidation Loans
• Federal PLUS Loans (for parents or for graduate and professional students)
• Direct PLUS Loans (for parents or for graduate and professional students)
• Direct PLUS Consolidation Loans
• Federal Perkins Loans
• National Direct Student Loans (NDSL)
• National Defense Student Loans (NDSL)
• Federal Supplemental Loans for Students (SLS)
• Parent Loans for Undergraduate Students (PLUS)
• Auxiliary Loans to Assist Students (ALAS)
• Health Professions Student Loans (HPSL)
• Health Education Assistance Loans (HEAL)
• Nursing Student Loans (NSL)
• Loans for Disadvantaged Students (LDS)
(http://loanconsolidation.ed.gov/borrower/bloans.html)
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