Federal Student Loan Consolidation Eligibility Requirements
Applying for a federal student loan consolidation is not an overly difficult process, but you must first ensure that you’re eligible to do so. The Higher Education Reconciliation Act of 2005 eliminated the option to consolidate student loans while still in school, so first and foremost, you must either be graduated, less than the half-time student, or dropped out of school in order to be eligible for a federal consolidation loan.
That being said, students who have received New York City Student Loans are eligible to consolidate those loans immediately after they’re fully disbursed. This is the only federal loan that follows these guidelines.
Defaulted student loans can be consolidated, but you must meet certain criteria in order to qualify. I recently wrote a post on this very topic that will let you know about the best way to handle a defaulted student loan so that it becomes eligible to be consolidated. This process often takes several months, so plan ahead.
In order to qualify for a Federal Direct Consolidation Loan, you must have at least one Federal Family Education Loan (FFEL) or Direct Loan. A single loan can technically be rolled into a consolidation loan, although this option should only be considered if you find a much better interest rate by consolidating.
Interest rates on federal consolidation loan cannot exceed 8.25%. So you should not even consider consolidating unless your interest rates are much lower than this figure. The advantage of a federal consolidation loan, however, is that the interest rate is fixed for the life of the loan. The exact interest rate is determined by a formula set by federal statute that takes into account your current interest rates and combines them to form a weighted average.