Perkins Loan Consolidation
Even though your Federal Perkins Loan has a low interest rate, you may find that when you combine the payments from all of your sources of loan funding, the monthly payments are too much for you to afford. That’s why the Federal Consolidation Loan program was created. This program was developed to assist you with managing your debt. If you have several different loan payments but would like to make just one payment, you may apply for a Federal Consolidation Loan. With loan consolidation, your lender combines your existing loans into a new single loan.
Interest Rate Calculation
The interest rate on your consolidation loan is a fixed rate, determined by calculating the weighted average of the loans you are consolidating, rounded up to the nearest 1/8th of one whole percent, not to exceed 8.25 percent. You may be offered a lower interest rate if you demonstrate a record of on-time, electronic payments.
Perkins Loan Consolidation Means Larger Interest Payments over the Life of the Loan
Loan consolidation can be a way to manage debt. You can often reduce your monthly payments, helping you meet other financial obligations. Consolidation extends your repayment periods from the standard 10-year repayment to up to 30 years, depending on the amount you consolidate.
The increased repayment period reduces monthly payments but at the same time, it increases the amount of interest you will pay, unless you increase your payments or fully repay the loan when your financial situation improves.
Loss of Eligibility for Deferments and Cancellation/Forgiveness
In the sections, “Perkins Loan Cancellations” and “Perkins Loan Forgiveness,” we described a variety of opportunities for taking advantage of loan cancellation or forgiveness. It is very important that you review your options for eliminating or reducing loan debt before you pursue consolidation. If you consolidate your Perkins Loans with other loans, you may lose eligibility for some cancellation or forgiveness programs.
Also, loan consolidation may make you ineligible for some types of deferments. It is very important that you weigh all of the factors and possible lost opportunities before choosing consolidation.
Married Couples and Perkins Loan Consolidation
Married couples may consolidate their individual student loans. However, when you consolidate your loans, you also permanently consolidate your liability. If one of you dies, the other is still liable for the loan. If you divorce, you are still both responsible for the loan.
Loans Eligible for Consolidation with a Perkins Loan
Only Federal loans are available for consolidation through the Federal Loan Consolidation Program.
Perkins loan consolidation can be an extremely effective way to be sure that you can meet your repayment obligation. However, you must weigh the consequences of consolidation against the benefits, especially if you may be eligible for cancellation opportunities.