Are My Student Loans Eligible for Consolidation?
Before considering student loan consolidation, you will need to find out if they're eligible. Most federal student loans are, including outdated loans that aren't even offered anymore.
That's because one of the major changes that has taken place in the past decade is today all federal student loans are now direct loans from the Department of Education. While the Department of Education is the lender, it uses several loan servicers to collect payments. There are nine loan servicers listed on the department's Federal Student Aid website, including Nelnet, OSLA Servicing and Navient. Think of these servicers like the management company that runs an apartment complex but does not own the building.
Although student loan consolidation might once have been complicated, currently the application is online and the process is simple. You can choose which federal loans you want to consolidate and which you do not. If you are in a grace period, meaning you are not currently in repayment, you can delay your loan application to coordinate timing with the end of the grace period.
The Department of Education will verify your loan balances with the National Student Loan Data System (NSLDS) and send you a notice for the pay off.
For the most part, if you fall below half-time enrollment or are not in school, you can consolidate your existing loans. If you return to school later and take out more loans, you can do another consolidation when you leave again.
However, your loans must either be in repayment or a grace period. You cannot be in default. In that case, you will usually need to get your payments on track or agree to switch to one of the income-driven repayment plans with your consolidation.
In the next section, we'll examine some of the downsides of consolidation and why it's good to have that information on hand before making any decisions.