[3] you will continue in school after July 1st 2006 and:

If you have taken additional loans since completing a pre-July 1st 2005 in-school consolidation, there are very few if any reasons and virtually no valid economic rationale not to consolidate the balance of you Stafford loans. The Meharry Loan Consolidation Program strongly recommends that unless you and/or your loans meet the criteria for loan cancellation, discharge, forgiveness or repayment from some other entity you should consolidate the balance of your eligible fully disbursed Stafford student loans before July 1st 2006 when potential expensive rate increases and programmatic changes are anticipated. 

The Prime Rate, the interest rate charged by banks to their most creditworthy customers, as of January  2005 is 7.25% and expected to continue to climb.  Current Federal student loans consolidation interest rates, for July 1st 2005 through June 30th 2006 are as low as 4.75% and 3.50% when borrower discounts are earned.  Current Federal student loan consolidation represents unmatched financial values and an important money management tool!  At no cost and with lower monthly payments, Federal student loan consolidation locks in and protects for the life of the loan fixed simple interest rates with no prepayment penalties.  

Legislation is before Congress that would change the current consolidation program from a fixed simple interest rate program to a more expensive variable rate or one that would give borrowers a one-time choice of consolidating their student loans using a variable rate or a fixed rate, both capped at 8.25%.  The fixed rate option would charge borrowers a one-percentage point higher interest rate than those who opt for the variable rate plus an "offset charge" equal to 0.50% of the loan principal.  The combination of the higher rate and the fee, is estimated to increase the cost of a $100,000 consolidation loan by nearly $25,000.  

If you have unconsolidated student loans, you should educate yourself and identify your individual options now!  You may never have another opportunity to obtain or protect low fixed interest rates such as these.

What You Should Know and Do: 

  • Minimum borrowing coupled with low student loan consolidation rates lowers the cost of education and releases discretionary income earlier in your career, which can be used to save and invest .  Combined with money management knowledge and savvy financial behavior these attributes represent the key to personal and professional success and happiness. 
  • In this particular scenario, you have both consolidated and eligible unconsolidated student loans, will continue in school and graduate sometime after July 1st 2006 when anticipated rate and legislative changes are anticipated to go into effect.  In this situation you should check with your consolidation lender/servicer and verify and confirm your in-school status, grace period eligibility (there is no limit to in-school deferment) and interest rate for your in-school consolidated loan.  
  • You will also want to be sure that you fulfill all of the requirements attendant to your status, i.e. begin repayment upon graduation, file for in-school deferment or forbearance.
  • When doing an in-school consolidation with a FFELP lender, in order to guarantee the lower in-school rate it is imperative that you follow the proper sequence of steps: 

1st) Submit an In-School Consolidation Request for Early Repayment waving the grace period on Stafford student loans; and

2nd) Place the Stafford loans into an in-school deferment status prior to the processing of the Consolidation Loan.

  • In general, the Meharry Loan Consolidation Program recommends that borrowers NOT include Perkins, HPSL and LDS loans in their in-school consolidation because these loans would lose their interest subsidy if consolidated.
  • Subsidized Federal Stafford loans continue their subsidy during in school periods when consolidated. 
  • If you have eligible Perkins, HPSL and/or LDS loans that were not included in an in-school consolidation you will need to consult with a consolidation specialist to assess your options.  For more information about in-school consolidation and to discuss your options, contact your lender/servicer or an experienced, knowledgeable professional consolidation counselor for the Meharry Loan Consolidation Program at  1-800-741-4704.  Be sure to reference Meharry when you inquire.
  • Remember, FFELP lenders are not required to grant a borrower’s request to enter repayment status early thus negating in-school consolidation for those students with only one FFELP lender. 
  • The U.S. Department of Education authorization allowing private FFELP lenders to provide “in-school” consolidation as of this writing (January 2005) has been extended and is set to expire March 31st 2006.  
  • Some lenders have been reported to have already begun denying “in-school” consolidation.  If this is your case, it is recommended that you use the “Super Two-Step” strategy and first consolidate your single FFELP lender Stafford loans with the Federal Direct Consolidation Program and then reconsolidate with the Meharry Loan Consolidation Program or the lender of your choice. 
  • Remember, FFELP in-school consolidations forfeit the six-month grace period for repayment following graduation.  However, low fixed interest rate and consolidation deferment and forbearance options remain available.  For more information and to discuss your options, contact an Meharry Loan Consolidation Program personal consolidation counselor at 1-800-741-4704. Be sure to reference Meharry when you call. 
  • If you meet the conditions for the Direct Consolidation Program in-school consolidation, your Direct Consolidation Loan will receive a grace period.  This means that after you graduate, or reduce your enrollment to less than half time, you will not be required to make payments on your Direct Consolidation Loan for six months. 
  • Private/alternative loans cannot be included in a Federal consolidation loan and private/alternative loan lenders do not qualify as second lenders for Federal loan consolidation. 
  • Before applying for consolidation, you should gather all of your student loan paper work; Promissory Notes, Disclosure Statements and create a secure and readily accessible file.  
  • You should know what you owe, to whom, how much and when payments are to begin and what your payment options are.  You should have a strategy if not a plan for repaying your student loans and meeting other personal and professional goals.  
  • Once you have gathered the above information for all of your eligible unconsolidated loans you will want to total the figures  and using a Consolidation Calculator (http://www.aslcc.com/eas/input_loans.cfm), determine the consolidation fixed interest rate, eligible repayment period (maximum number of months/years you can take to repay the loan), repayment plan options (level, graduated) and the monthly payment.  
  • Take all of your summary information for your consolidated and unconsolidated loans including Perkins, HPSL and LDS loans and enter on a paper or electronic spreadsheet for ready and easy access and future reference.  This will be vital information when preparing your spending, saving and investment plan (budget) during your remaining school years and especially during your post-graduate training and career years. 
  • You should become financially savvy and take control of your money. As a student this is mostly an effort to limit debt and be very conscience of what, where and how you spend your money (financial aid and earnings). It also means that you should have a plan for repayment, which most likely should include consolidation as well as loan forgiveness or some other form of service or refinancing where possible.
  • For students continuing in school post-July 1st 2006 the Meharry Loan Consolidation Program strongly encourages and urges you to inform and educate yourself about student loans and student loan consolidation post July 1st 2006 when anticipated changes in legislation may substantially change Federal student loan and consolidation programs as discussed above.  You will want to consult with your financial aid office, lender/servicer and a trustworthy and knowledgeable consolidation counselor to be certain to understand, confirm and verify how any changes in the rates and/or legislation will effect you; i.e., change in fixed and/or variable rates, calculation of rate formulas, maximum rates, charges and fee, loan terms, monthly payments, deferment, forbearance and/or forbearance options and criteria for post-July 1st 2006 loans.  All aspects of loans consolidated prior to July 1st 2006 will be grandfathered in based upon the signed completed promissory note and will not be subject to any rate, term or legislative changes that take effect after July 1st 2006.
  • If you have completed your consolidation recently, you want to determine if your consolidation loan is within the 180 day period following the first disbursement of your consolidation loan.  You  have 180-days, after the first disbursement of your consolidation loan, to add a loan(s) to the consolidation. After 180-days, you must complete a new application either listing the existing consolidation loan and the new unconsolidated loan(s) or just the new unconsolidated loans. 
  • Should you need assistance, and even if you think you do not, please contact your servicer’s customer service office or an Meharry Loan Consolidation Program personal consolidation counselor.  The complexity of student loan consolidation is such that you should never assume and always confirm and verify (in writing) any questions you have with your lender/servicer or your consolidation counselor.  It is always wise to work with a knowledgeable and trustworthy consolidation specialist to assure that you are working with accurate and complete information. 
 ©  2005 Meharry Loan Consolidation Program/Education Association Services (EAS) Group, LLC
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