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Stafford Loan Consolidation is the Department of Education’s program for refinancing Federal Student Loans. Consolidation loans can simplify your loan repayment and fix your interest rate for the life of the loan. Despite its name, you can apply for consolidation even if all of your federal loans are with the same lender; you can even consolidate a single federal loan, as long as the balance is at least $7,500. Federal loans include Subsidized Stafford Loans, Unsubsidized Stafford Loans, William D. Ford Direct Loans and Perkins Loans.

Consolidation loans have the longest repayment periods permitted by law. These repayment periods extend from ten to thirty years. Repayment may be based on fixed, graduated or income-contingent schedules, depending on the kind of consolidation program chosen. There is never a penalty for prepayment. Under certain circumstances — such as continued study, disability and unemployment — students can postpone payments on their consolidation loans by requesting deferment. Similar to the Stafford loan program, during a deferment, the Federal Government pays the interest that accrues on the portion of your consolidation loan that would have been eligible for an interest subsidy if you had not consolidated. Interest will continue to accrue on the portion of your consolidation loan that was not eligible for an interest subsidy during deferment. Consolidation borrowers are responsible for interest that accrues during deferments.

Which Lender to Use
If you are planning a career in the Public Interest, or in any other field that is eligible for forgiveness of federal loans after 10 years of payments, you must consolitdate your federal loans (Stafford Loans, Graduates Plus Loans) with a Federal Direct Consolidation Loan. Only loans in the Direct Loan program are eligible for loan forgiveness under the College Cost Reduction and Access Act of 2007. You may consolidate online at www.dl.ed.gov. You may be eligible for income-based repayments (IBR), which will significatly reduce your monthly payments.

If you are certain you will not be employed in any field for loan forgiveness, you may consolidate your loans with any lender approved by the U.S. Department of Education.

Consolidating Your Perkins Loan
Before you decide to consolidate your federal Perkins Loan(s) with your Stafford Loans you need to understand that by consolidating your Perkins Loan you will lose the right to Perkins loan forgiveness. Perkins loans may be forgiven by the US Department of Education over a five-year period if you are employed in qualifying employment: teaching, law enforcement, military and certain Public Interest careers. Recently, a court decision to grant Perkins Loan Forgiveness to lawyers working in the Public Interest brought this unique opportunity to light. If you are employed, or think you might be employed in a field that makes you eligible for Perkins Loan Forgiveness, you should not consolidate your Perkins Loan. If you consolidate it you will forfeit your right to loan forgiveness provisions.