Federal Loan Consolidation FAQ

General

What is student loan consolidation?

Student loan consolidation allows you to combine one or more existing student loans into a single new loan.

  • It is a convenient, affordable way to repay your federal education loans.
  • Based on the total educational loan indebtedness, extended repayment term allows for a lower monthly payment.
  • Allows you to obtain a fixed interest rate.
  • Makes managing your debt easier with just one payment to just one lender.


How do I apply for a consolidation loan?




Does federal loan consolidation require a credit check?

No.

What happens after I apply?


  • We process your application and contact your existing loan holders, requesting a loan pay-off.
  • The old loans are paid off based on the information reported by your loan holders.
  • The balances are transferred to a new loan.
  • We send you a Truth in Lending Disclosure Statement which outlines the term, balance and monthly payment amount of your new loan.
  • We send your first billing statement for your consolidation loan.

How long will it take to process my application?

The consolidation process takes approximately 6-8 weeks. During this time it is important that you continue to pay the student loan bills you receive.

How do I find the status of my consolidation?

Call our automated telephone system toll-free at 1-800-338-5000 to obtain loan information, including the application date, estimated processing time and any information required to process your request.

Can I cancel my consolidation loan if I change my mind?

You may only cancel the application if disbursement has not occurred. Once your original loans are paid, a new loan is created and we are unable to reverse the procedure.

> Back to Top

Eligibility

What loans are eligible for consolidation?


  • Only federally guaranteed student loans can be included in a federal consolidation.
  • These loans must be in repayment, deferment, forbearance, or a grace period.
  • Private loans are not eligible for federal consolidation.

Eligible loans include:

  • Federal Stafford Loan (STFFRD, UNSTFD)
  • Federal Consolidation Loan (CNSLDN, SUBCNS, UNCNS)
  • Federal Direct Loan (DSS, DUS, DSCON, DUCON, DPLUS, DGPLUS)
  • Federal Graduate Plus Loan (PLUSGB)
  • Federal Perkins Loan
  • Federal Parent Loans for Undergraduate Students (PLUS)
  • Federal Supplemental Loan for Students (SLS)
  • Federal Insured Student Loan (FISL)
  • Health Professions Student Loan (HPSL)
  • Federal Nursing Student Loan (NSL)


What if I have consolidated my loans previously?

You may only consolidate a prior federal consolidation loan if you:

  • Have acquired additional federal education loans since you consolidated or
  • Did not include all eligible loans in your previous consolidation.


Can I add another loan if I already consolidated?

Yes. If your loan consolidation was completed:

Note:  By adding loans to your existing consolidation loan, the repayment term, interest rate and monthly installment amount may change.

I have Parent PLUS loans for more than one child. Can I consolidate them separately?

Yes. You can:

  • Consolidate Parent PLUS loans separately from your other eligible federal loans or
  • Do separate consolidations of the loans for each child.


Can I consolidate my Parent PLUS loans with my child's FFELP loans?

No. The loans were disbursed to two different parties, under different Social Security numbers. Federal law prohibits multiple accounts to be consolidated together.

Can I consolidate my loans with my spouse?

No. As of July 1, 2006, spousal consolidation is no longer available.

Please note: For spousal consolidation loans that were disbursed prior to July 1, 2006, both parties are responsible for the loan; therefore different rules apply concerning these loans.

Can I consolidate a defaulted loan?

Maybe - If your defaulted loan is through AES, you may be able to rehabilitate the loan or make regular payments to qualify for consolidation. Call 1-800-338-5000 for details.

No - If the defaulted loan is through any other lender, then AES cannot consolidate this loan.

> Back to Top

Terms

Is there a required minimum balance or limit to the number of loans to consolidate?

No. There is no required minimum balance per federal rules.

There is no limit to the number of loans that may be consolidated. It is possible to consolidate just one loan in order to extend the repayment period.

How is the interest rate determined?


  • The interest rate is calculated as the weighted average interest rate of all the loans being consolidated, then rounded up to the nearest 1/8 of a percent.
  • The interest rate will not exceed 8.25%.


What interest rate reductions are available?


  • Get a .60% rate reduction for consolidation during the loan grace period.
  • Get an immediate .25% rate reduction for automatic debit payments.

Call 1-800-338-5000 to find out more about AES Network Consolidation programs.


Are there any fees for a federal consolidation loan?

No.

Can I consolidate during a grace period?

Yes. Consolidating during a grace period for your underlying loans is a good idea. You can receive a .60% lower interest rate on your new consolidation loan.

When you complete your online consolidation application, you will have the option to either process the application immediately or hold it until your grace period ends. Choose to hold it. This will lock in your interest rate, and if you have subsidized loans, enable you to continue to receive government subsidy payments on interest.

Are consolidation loans eligible for discharge or cancellation in the event of death or total disability?

Yes. In the event of death or total disability of the borrower, the federal government does allow discharge or cancellation of the remaining loan amount.

> Back to Top

Advantages & Disadvantages

What are the advantages of loan consolidation?


  • Reduce your monthly payment
  • Pay just one bill to just one lender
  • Lock in a lower FIXED interest rate, not to exceed 8.25%
  • No fees, income requirements or credit checks
  • Additional .60% savings for consolidating during your existing loan(s) grace period
  • Immediate .25% rate reduction, if available, for automatic debit payments
  • No prepayment penalties
  • Extend your repayment period
  • Greater disposable income
  • Experienced loan servicer with over $15 billion in consolidation loans
  • Apply online

Call 1-800-338-5000 to find out more about AES Network Consolidation programs.


What are the disadvantages of loan consolidation?


  • Longer repayment period
  • Greater interest paid over the life of the loan because you are making smaller payments over a longer period of time
  • Possibility of limited deferment or forbearance options
  • May lose current loan forgiveness benefits
  • May lose current loan incentives

You may want to carefully consider including Perkins, HPSL, and LDS loans in your consolidation. These loans:

  • Do not retain their deferment subsidy if included in a Federal Family Education Loan Program (FFELP) consolidation, and
  • Offer specific loan forgiveness programs which do not carry over to a FFELP consolidation.


When is the best time to consolidate?

There is no deadline to consolidate your loans. However, interest rates change every July 1st. Things to consider include:

  • Timing your consolidation based on the last 91-day T-bill auction in May. If rates increase, consolidate before July 1st. If rates decrease, consolidate after July 1st but before the end of your grace period.
  • Current interest rates of your existing loans. Because a consolidation loan interest rate is based on the weighted average of your existing loans, it is best to consolidate while your current loan interest rates are lower. A consolidation loan interest rate will not exceed 8.25%.
  • Consolidating during a grace period when you can get an additional .60% interest rate reduction.


Will consolidating my debt hurt my credit?

No. Federal student loan consolidation is not a debt counseling service and will not hurt your credit.

> Back to Top

Repayment

Are there any prepayment penalties for paying ahead?

No. You can pay your loan off early without penalty.

When does repayment begin?

Repayment of your consolidation loan begins within 60 days of the loan disbursement. You will receive a disclosure statement and your first bill.

What is the repayment term?

The maximum repayment term allowable depends on the total educational loan indebtedness.

Education Loan Amount Repayment Term
$0 to 7,499.99 10 years
$7,500 to $9,999.99 12 years
$10,000 to $19,999.99 15 years
$20,000 to $39,999.99 20 years
$40,000 to $59,999.99 25 years
$60,000 or more 30 years


What are my repayment options?

  • Equal Repayment Plan
    • Payment amounts are fixed over the life of the loan
    • Fixed, full principal and interest monthly payments
    • The least expensive option
  • Select 2
    • First two years: interest-only monthly payments
    • Remainder of the term: fixed, full principal and interest payments
  • Select 5
    • First two years: interest-only payments
    • Next three years: fixed, full interest and partial principal payments
    • Remainder of the term: fixed, full interest and principal payments
  • Income Sensitive
    • Your monthly payments are based on a percentage of your monthly income (4-25%)
    • Fluctuate annually with changes in your income
  • Income Based Repayment
    • Payments based on your income and family size
    • Payments typically will not be more than 10% of your income
    • Remaining debt may be forgiven after 25 years of qualifying payments
  • Extended Repayment
    • Extends repayment up to 25 years, if you have more than $30,000 in eligible student loans

You can get an estimate of the different repayment options using our Consolidation Calculator.

Can I change my repayment plan later?

Yes, without fees or penalties. Review payment plan options or contact us to request a change to your repayment plan.

Is there a minimum monthly payment?

Yes. The minimum monthly payment is $50.

Can I get deferment or forbearance for a consolidation loan?

If you have trouble paying on your consolidation loan, you can postpone payment with deferment or forbearance. Some options may not be available.

Do consolidation loans have a grace period?

No.

Will my direct debit arrangement be affected?

Yes. Even if you already have a direct debit arrangement for your current AES-serviced loans, you will be required to submit a new direct debit request form for your consolidation loan.

We will include this form with your Truth In Lending Disclosure Statement upon payout of your consolidation loan.

> Back to Top