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Consolidation Information

Loan consolidation is a sometimes confusing topic with which many students are not familiar. We have designed the information below to answer questions you may have about consolidation but it is only a guide . Ultimately you will have to determine whether consolidation meets all, or some, of your loan repayment concerns. If you have questions about consolidation then we suggest you speak with your lender(s) about their programs. You are also welcome to email the financial aid office at finaid@law.msu.edu.

Should you consolidate?
As students near graduation, they are flooded with letters about loan consolidation. Before you consolidate, you should weigh the benefits and drawbacks of consolidation.

Benefits of consolidation:

• Lock in your interest rate.
  The interest rate effective 7/1/06 to 6/30/07 for loans disbursed between 7/1/98 and 6/30/06 is 6.62% for periods of in-school, grace, or deferment. The rate is 7.22% for periods of forbearance or repayment. These loans have variable interest rates which are determined every year generally by June 1 and are based on the 91-day T-Bill rate. The new rates are effective from July 1 to June 30. Please keep in mind that some Stafford Loans have different rates and new loans disbursed July 1st, 2006 or later have a fixed interest rate of 6.8% already. Please note that you cannot consolidate unless you are in your grace or repayment period; consolidation while you are in school is no longer possible.
  
  
• Bring multiple loans to one loan servicer
  
  Consolidation may make your repayment easier because you will have one lender. You will also have one lender through which you will file for deferment and forbearance.
  
  
• Consolidation lenders often offer various repayment incentives to lower repayment costs
  
  Incentives are often connected with: electronic auto pay (typically a 0.25% interest rate reduction) and/or on-time repayment (typically a 1% rate reduction for a set number of on-time payments). Check with your lender for details.

Drawbacks of consolidation:

• Lose benefits of Michigan Students First (MSF) Stafford loans serviced by Great Lakes. (MSU began making these loans in Fall 2003). Those benefits include:
  
  Rebate of 3% origination fee
  
  Note: This benefit is only forfeited if you consolidate your loans prior to the sale of the loan to the State of Michigan's loanholding company (Michigan Higher Education Student Loan Authority, or MHESLA). You will receive a letter from MHESLA when your loan has been sold to them. In addition, you can check NSLDS as MHESLA, not MSU or Comerica, will then be listed as your lender.
  
  NOTE: If you consolidate before the loan has been sold, you will be billed the amount of the origination fee that was advanced to you by MSU.
  
  On-time payment savings. Receive 0% rate eligibility after your first 36 months of on-time repayment. You must continue with your on-time payment record to keep the 0% rate.
  
  
• You cannot refinance the consolidated loan at a later date for a better rate if rates are lower in the future. The interest rate is locked for the life of the loan.