Federal Loan Consolidation

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Federal Loan Consolidation

• Office of Financial Aid
• Fordham Law School
• 2006

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What we will cover

• In-School Consolidation - expires July 1, 2006
• What to consider before consolidating
• How it works
• Multiple Consolidation
• Deficit Reduction Act of 2005
• Grad PLUS Loans

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In-school Consolidation

• FEDERAL LOANS ONLY
• New loan, new interest rate
• rate to change July 1, 2006
• Fixed interest rate for life of loan
• Interest rate is the weighted average of all
  loans being included in the consolidation,
  rounded to nearest 1/8th percent.
  
• If extended repayment period, extended cost
• May not exceed 30 years
• No prepayment penalty

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Things to consider

• Lock in the current rate
• In-school or in grace at 4.75
• In-repayment at 5.375
• Rates are subjected to change in July.
• And are probably going up!
• Lose grace period
• Enter immediate repayment
• Yet Deferment option !

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(No Transcript)
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How it works

• If you decide to take advantage of this
  time-limited offer, you must
  
• Know how much you borrowed and from which lender
  (s).
  
• Visit www.nslds.ed.gov to find your current loan
  holder (s) and total Federal loan debt
  
• Complete an application - sooner the better
• Enter repayment
• Qualify for in-school deferment
• Maintain at least half time enrollment

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Multiple Consolidation

• You can consolidate multiple loans
• Consolidate your new loans with your previous
  consolidated loans
  
• If 2 years last year weighted average of 3.5
• If 1 year last year - weighted average of
  3.875
  
• Important note to keep in mind
• New interest rate is the weighted average of new
  loan and the prior consolidated loans

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Deficit Reduction Act of 2005

• New Terms on Federal Stafford Loans
• After July 1st 2006, interest rates on new
  Stafford loans (disbursed after June 30th) will
  increase to 6.8.
  
• Current Staffords remain at variable rate
• Interest rate will be fixed
• New Graduate PLUS loan

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Grad PLUS Loan

• Available to graduate and professional students
• Used to supplement the unsubsidized Federal
  Stafford loan.
  
• Becomes effective July 1, 2006
• Same eligibility requirements as Stafford Loan,
  except for credit.

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Grad Plus vs. Stafford Unsub.

• Interest rate will be fixed at 8.5.
• No grace period
• repayment will begin directly after graduation,
  or upon leaving graduate school or falling below
  half time in school.
  
• there is no annual or aggregate loan limits
• Requires a credit review

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Credit Requirements

• You will need to have the absence of bad credit
  in order to receive a Grad PLUS Loan.
  
• Your credit does not have to be as good as you
  would need to have for most private educational
  loans.
  
• No cosigner requirement
• Fixed rate regardless of credit

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Grad PLUS vs. Private

• Absense of bad credit
• Higher approval rate
• No co-signer
• Fixed rate regardless of credit
• Consolidation
• Extend repayment term to 30 years
• Fees 0 4

• Good credit
• Denial for poor credit (credit score below 640).
  
  
• Co-signer/sponsor option
• Higher credit score better rate (variable)
• Consolidation higher fees
• Repayment term of 20 years
• Fees 0 16

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Questions

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