Consolidating Federal PLUS Loans

Parent borrowers of the federal PLUS loan may consolidate, or refinance, their loans into a federal consolidation loan. Borrowers may even consolidate just one loan.

There are two main reasons borrowers decide to consolidate their federal loans: a fixed interest rate and lower monthly payments. Other reasons include the convenience of having just one loan with one monthly payment and the prevention of defaulting on one's loans.

The consolidation loan is a new loan, so the borrower needs to complete an application and a promissory note. The borrower lists on the application all of the various loans to be consolidated. The eligible loans listed on the application are paid off by the consolidation loan. The application may be completed online or on paper.

There are no fees and no pre-payment penalties on a federal consolidation loan. Direct PLUS consolidation loan borrowers are subject to a credit check.

The interest rate for a federal consolidation loan will be a fixed rate determined by the weighted average of the interest rates on the loan(s) being consolidated, rounded to the nearest higher one-eighth of one percent. You may determine your weighted average interest rate by using the Repayment Estimator at the StudentAid.gov website.

Repayment terms range from 10 to 30 years, depending on the amount being refinanced.

Most of the current deferment and forbearance provisions of federal PLUS loans are retained after being consolidated. Specific deferment options include:

• In-school deferments (refers to enrolled parent; not student);
• Graduate fellowship;
• Rehabilitation training;
• Economic hardship; and
• Unemployment.
  
  NOTE that the in-school forbearance option on PLUS loans is not available for PLUS consolidation loans. So if you are currently not making payments on your PLUS loan(s) because of the in-school forbearance, you will need to use another type of forbearance option on the PLUS consolidation loan if you want to continue postponing payments while the student is enrolled. Realize that there are limits on the lengths of certain forbearance options. Be sure to inquire about postponement options available to you from your consolidation loan servicer.

How to Apply

Apply for a PLUS consolidation loan at StudentAid.gov; log on by using your FSA ID and click on the Repayment & Consolidation tab.

You may call the Loan Consolidation Center at 800.557.7392, Monday through Friday, from 8 a.m. to 11 p.m. after you submit your application to check on its status.