How Do I Consolidate My Child’s Student Loan?

If your child has a bundle of different loans from college, you may think, I’d like to consolidate my child’s student loan.

This can be a good idea, if you do it properly and at that right time.

Do You Qualify?

The first information to gather when you wonder, How will I consolidate my child’s student loan? is information that tells you if you qualify for loan consolidation.

The student must be out of school (enrolled half time or less) in order to qualify for consolidation. You need to be in the grace period of the loans (the months between leaving school and when you must start making loan payments) or you must be actively paying on the loan and be current on your payments.

If these circumstances do apply to you, then you can consider consolidation.

Federal Loan Consolidation

The next consideration is the types of loans your child has. If you have federal student loans, then all of them can be consolidated into one loan.

When you’re trying to consolidate my childs student loans, you can consolidate into one single loan if all of the loans are FEELP loans. These include Stafford — an extremely common type of loan - PLUS, SLS, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Direct Loans and Guaranteed Student Loans. All of these are different types of federally guaranteed loans.

The government has a division that handles consolidation of Federal loans, and they set the interest rate for the consolidated loans.

When you consolidate the loans guaranteed by the Federal government, they figure the interest rate by creating a weighted average of all the interest rates, then rounding up 1/8 of a percent. This rate is capped at 8.25 percent.

The rates on most Federal loans are reasonable, particularly when compared to the going rate for borrowing, so the interest rate on a consolidated loan is generally reasonably low.

The application for a Federal consolidation loan is online. While you can download it and mail the application in, this process takes much longer to complete than the online application with an electronic signature.

Private Student Loans

If you have private student loans, you may still want to consolidate, but don’t try to do so with your child’s federal loans. A loan consolidation with private student loans is similar to consolidating credit card debt or any other type of personal debt.

There are no special interest rates for private student loans, so you pay the going rate.