Consolidating unsubsidized stafford loans
Forbearance provisions for consolidation loan borrowers are the same as those for Direct subsidized, Direct unsubsidized, PLUS, and SLS loan borrowers.
Contact your ED servicer for more information about forbearance options. Yes, you can consolidate during a period of deferment, and, in some cases, this may allow you to obtain a lower Consolidation loan interest rate.
Who can help me decide if consolidation is right for me?
You can contact the Direct Loan servicer or your school financial aid office for more information about consolidation. If you have multiple student loans at different interest rates and want to know what the interest rate will be for a Consolidation loan, TG's Consolidation Calculator can help you make that determination.
There may be advantages or disadvantages to consolidating certain loans. Generally, it's not a good idea to consolidate if the interest rate you will pay on your Consolidation loan is higher than the rate you are paying on your current loan(s).
This may happen in cases when the Consolidation loan interest rate has been rounded to the nearest one-eighth of a percent (as required) and the resulting rate is higher than the rate on the underlying loans being consolidated.
You lose a few deferment options upon consolidation, but the ones most frequently used by borrowers (the in-school deferment, unemployment deferment, and economic hardship deferment) are still available for a Consolidation loan.
Unlike the Federal Direct Subsidized, Federal Direct Unsubsidized, and PLUS Loan Programs which each have a loan fee, a borrower does not have to pay a fee to consolidate.
It's a good idea to ask the servicer to figure out what your monthly payment will be if you consolidate and how long it will take to pay the total loan balance.
If the servicer offers you an extended repayment period so that you can have a lower monthly payment, be sure you weigh that option carefully.
Will I be required to make payments on my Direct Consolidation Loan while in school? If your Direct Consolidation Loan servicer (an entity that services Direct loans on behalf of ED) receives information from your school that you are enrolled once again on at least a half-time basis, or receives your request for an in-school deferment, your servicer will put your Consolidation loan into an in-school deferment status.
You will not be required to make payments on your Consolidation loan until you drop to less-than-half-time enrollment or graduate.
The interest rate is higher when you are in repayment.