Consolidating stafford and perkins loans

WARNING: It is very dangerous to consolidate federal loans into a private consolidation loan.

You will lose your rights under the federal loan programs once you choose to consolidate with a private lender.

Borrowers in default may also consolidate in certain circumstances.

Consolidation was previously available to borrowers while they were still in school. Congress also eliminated joint consolidation for spouses, effective July 1, 2006.

(see box below), You can consolidate during grace periods.

This may lead to a lower interest rate on a Direct Consolidation loan, but only if you are consolidating variable rate loans. You will generally receive your first bills within 60 days after the new Direct Consolidation loan is made.

The good news is that the Department explains on its web site that if any loan you want to consolidate is still in the grace period, you can delay entering repayment on your new Direct Consolidation Loan until closer to your grace period end date.

You can indicate this when you apply, and the consolidation servicer will wait to process your application until the appropriate time.

It's important to understand and carefully consider all factors before consolidating.So, the interest rate on a consolidation loan may be higher than the underlying loans.However, the interest rate is fixed for the life of the loan.Depending upon the total balance you are consolidating, you may extend the repayment period for up to 30 years with consolidation.The extended period makes the monthly payment amount more manageable; however, the longer your loans are in repayment, the more interest you will pay over the life of the loan.

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As you weigh the pros and cons, keep in mind that timing is critical.

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