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Apply for Consolidation

If you've explored the tradeoffs, are eligible, and decide to consolidate, the next decision is about timing.  The two issues to consider are the types of loans that you have and expected changes in the interest rate that would be applied to your consolidation loan.

• Loan Types – If you received some of your loans through the FFEL program, it's best to submit your consolidation request around your 4th month of grace, or 2 months before your first payment is due.  This is because it can take up to 2 months to process a consolidation request, and the grace period for FFEL loans ends as soon as a request is granted.  If you received your loans through the Direct Loan program, then you can consolidate any time up through your 4th month of grace, and you will still get your full 6 month grace period.
• Interest Rate Changes – The interest rate charged on a consolidation loan is the weighted average of the interest rates on the loans to be consolidated.  If any of these loans have a variable interest rate (e.g., were disbursed before July 1, 2006) and your grace period includes the date July 1, the interest rates on your underlying loans will likely change during your grace period, and you want to make sure that you capture the lowest one.  The interest rates depend on the last Treasury Bill auction held before June 1 of each year, so if the auction price determined during your grace period is likely to be higher than last year's, then it's best to consolidate *before* the rates change on July 1, whereas if they are likely to be lower, then it's best to consolidate *after* the rates change.  BankRate.com has a good summary of current rates compared to a year ago.

To submit a consolidation request, simply contact your lender.  For Direct Loan consolidation, go to the Direct Loan consolidation Web site.  For FFEL consolidation, if you're not sure who your lender (or servicer) is, contact your school's financial aid office or check your record at the NSLDS.

Chaperone Assist ⇒ Student Loan Chaperone can guide you through the application process.

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