Consolidating subsidized and unsubsidized student loans
This means, for example, that a Perkins Loan on its own cannot be consolidated into a Direct Loan.You may consolidate with Direct Loans during grace periods, once you have entered repayment, or during periods of deferment or forbearance.There are numerous problems that can arise–for example, if one of the divorced ex-spouses wants to apply for IBR.The Department says that borrowers with joint consolidation loans may repay under the IBR/PAYE plan as long as both spouses qualify with partial financial hardships.
With just a few exceptions, you get only one chance to consolidate with the government loan programs.
Another common problem is that partial discharge of a joint consolidation loan under any of the discharge programs (other than death discharge) does not eliminate joint liability for the remaining balance.
Further, borrowers with joint FFEL consolidation loans, according to the Department, may not reconsolidate into Direct Loans and therefore are not eligible for public service loan forgiveness. The fixed rate is based on the weighted average of the interest rates on the loans at the time of consolidation, rounded up to the nearest one-eighth of a percentage point.
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.
Consolidation loan borrowers should not be charged origination fees.