How to Consolidate Your Loans

You’re ready to consolidate your loans, now you just have to complete

the process using the following steps:

1. Gather information on your loans. Grab the Personal Student

Loan chart you completed in Chapter 1. You will need to have the

following information on your open loans: the servicer, the interest

rate, and the loan status. Whether you consolidate with direct

lending or one of your current lenders, you’ll be asked for this

information online or over the phone for the following reasons:

• Servicer: The consolidator has to know who to contact to pay

off the old lender in order to transfer the loan.

• Interest rate: So your new interest rate can be calculated, your

new lender needs to know what all your old interest rates were.

Your consolidated loan interest rate is the weighted average of

your current loans.

• Loan status: You can’t consolidate a defaulted loan until you’ve

made payment arrangements with your guaranty agency and

followed the payment plan for at least three months. Unsubsidized

versus subsidized is also important for the loan status. If

you have both kinds of loans, you will have one consolidated

subsidized loan and one consolidated unsubsidized loan.

Finally, if your loans have already been consolidated, you can

reconsolidate only in two circumstances: if you have unconsolidated

loans to add into your consolidated loan, or if you are

reconsolidating into direct lending.

2. Fill out the forms. With direct lending, you can fill in all your loan

information online and e-sign the form. You can also print the

forms and mail them in. If you are consolidating with another

lender with whom you currently have federal loans, you should

contact them to ask whether applications are accepted online, by

mail, or by giving information to a representative over the phone.

Even if you are diligent, you still want to watch to make sure the

first payments post, especially if you filled out a direct debit form.

3. Don’t stop making payments on your old loans until you know

your consolidation is complete. This is the easiest way that good

intentions can go horribly wrong. You consolidate your loans to

make sure you never miss a payment, then you do miss a payment

while waiting for your loan to be consolidated. Wait until you have

some sort of written confirmation of your consolidation’s completion

and the date of your first payment before you stop making

payments on your previous loans.

4. Follow up, follow up, and follow up some more. Keep track of

your loan consolidation process by checking either online or making

a phone call every two or three weeks. If you forgot to sign

mailed-in forms or if there’s some other holdup, you want to know

right away what it is so you can fix it.