Graduate school can be extremely expensive, with many students taking out multiple loans to cover the costs. According to data from the Federal Reserve, the average graduate student loan debt is over $71,000. With interest rates on the rise, managing multiple student loans can quickly become overwhelming. Consolidating your graduate school loans into one new loan with a fixed interest rate can help simplify your payments and potentially save you money over the life of the loan.
What is Student Loan Consolidation?
Student loan consolidation allows you to combine multiple federal student loans into one new loan. This new consolidated loan will have a fixed interest rate based on the weighted average of the rates on the loans being consolidated. Consolidating loans can have several key benefits:
- Simplify repaying loans with a single monthly payment instead of multiple payments
- May qualify for lower monthly payments with extended repayment terms
- Gain access to alternative repayment plans or forgiveness programs
- Reduce interest costs by qualifying for a lower fixed rate
Federal student loans including Direct Loans, Perkins Loans, and FFEL Program loans are all eligible for consolidation. Private student loans cannot be consolidated into federal direct consolidation loans.
Should You Consolidate Your Graduate Loans?
Here are some key factors to consider when deciding if consolidating your graduate school loans is right for you:
Interest Rate Savings – Consolidating can lower your interest rate if you have older loans at a higher fixed rate or variable rate. Consolidating resets the rate based on your combined loans.
Repayment Term Flexibility – Consolidating loans can extend your repayment term up to 30 years. This spreads payments over a longer period for a lower monthly minimum payment.
Loan Forgiveness Eligibility – Consolidating loans can allow access to certain forgiveness programs like Public Service Loan Forgiveness (PSLF). Access depends on the loan types consolidated.
Future Borrowing Needs – Once consolidated, loans cannot be consolidated again or separated. This may limit future borrowing if needed.
Deferment and Forbearance – Deferment and forbearance options can be lost when consolidating. Make sure to evaluate before giving up these options.
Analyze your specific loan situation carefully before deciding if consolidation is optimal. Use student loan calculators and the Federal Student Aid website tools to run the numbers.
How to Consolidate Graduate School Loans
Follow these steps to research, apply, and complete the federal student loan consolidation process:
- Review current loans – Log in to your Federal Student Aid account and access loan details including balances, rates, loan types, and servicers.
- Research consolidation pros and cons – Use student loan calculators and the Federal Student Aid information to analyze consolidation scenarios.
- Check consolidation eligibility – Make sure all loans are federal direct loans or FFEL loans. At least one loan must be in grace period or repayment (not in school deferment).
- Select a servicer – Research the federal loan servicers and select the company you want managing the new consolidated loan.
- Complete application – Apply online with your selected servicer. Provide loan data, choose repayment plan, and submit cosigner details if applicable.
- Monitor progress – Loan verification and processing takes 30-90 days. Make payments on current loans until the consolidation is complete.
- Update auto-debit – Set up automated payments through your servicer website on the new consolidated loan to avoid missed payments.
FAQs about Consolidating Graduate School Loans
What types of loans can be consolidated?
Federal Direct Loans, FFEL Program loans, and Perkins Loans can be consolidated. Private student loans are not eligible. At least one loan must be in the grace period or in repayment (not deferred).
What are the requirements for joint consolidation?
Spouses can consolidate their loans together. The combined balance will be under both names. Spouses’ credit scores are averaged to determine the interest rate.
Can I consolidate just some of my loans?
No, federal consolidation requires combining all eligible federal loans into one new loan. You cannot pick and choose specific loans to consolidate.
How do I apply for Public Service Loan Forgiveness with consolidated loans?
To receive PSLF credit for payments before consolidation, you must consolidate your loans first and then submit the PSLF form. Payments before consolidation on any Direct Loans will still qualify.
Can I still get an income-driven repayment plan after consolidating?
Yes, you can select an income-driven repayment plan like REPAYE or PAYE when you apply for federal direct consolidation. Your monthly payment will be based on your AGI.
Key Takeaways
- Consolidating graduate school loans can simplify repayment with one monthly bill and lower interest costs but also limits future flexibility.
- Federal student loans are eligible for consolidation while private loans are not.
- Analyze your specific loans and financial goals before deciding to consolidate.
- The consolidation application process takes 30-90 days – keep making normal payments until completed.
Consolidating loans is a personal decision based on your loan situation. Use all available information and tools to determine if consolidation is the right choice for managing your graduate school debt.
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