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If your child isn't sure about college, or doesn't get accepted, consider community colleges. Your child can get credit, develop skills, and transfer in a year or two.

Expert Advice

"Saving for college does NOT penalize a family -- assets, such as college savings, are protected in current financial aid formulas."
Savings and Aid
Jack Joyce, director, Guidance Services, College Board

Student Loan Consolidation Programs

Savings and Convenience Are Key Benefits

Your child may have taken out several loans to help pay for college. These loans may be with different lenders and have different interest rates.

If so, your child should consider consolidating the loans. A loan consolidation means taking out one loan to pay off other loans. This creates a new, combined debt.

These loans often let borrowers get lower interest rates that are locked in. Loan consolidation also offers the convenience of making only one loan payment per month, instead of several payments.

Federal Consolidation Loans

Beginning July 1, 2010, all federal consolidation loans are made through the federal Direct Loan Program. This means that all consolidation borrowers have the same lender, the U.S. Department of Education.

If your child has federal education loans to consolidate, contact the financial aid office at your child’s college or go to the federal government’s Direct Consolidation Loan website. 

Consolidating one or more federal education loans into a new loan offers several advantages:

  • The minimum monthly repayment amount on a federal consolidation loan may be lower than the combined payments on a borrower’s federal education loans.
  • Having only one lender and one monthly payment makes it easier to manage debt. Payments can be made electronically by enrolling in the Electronic Debit Account (EDA) program.
  • There are multiple plans to choose from, including a new Income Contingent Repayment (ICR) Plan.
  • Borrowers can switch between repayment plans as their needs and financial situations change.

Private Consolidation Loans

If your child has private loans to consolidate, contact the current lenders. You should also research private consolidation loans available from other lenders and evaluate all options.

Here are some points to keep in mind:

  • The primary benefit of private loan consolidation is to obtain a single monthly payment; your child is replacing two or more private education loans with a single loan.
  • Interest rates on private consolidation loans are based on credit scores; borrowers may be able to get a lower rate through consolidation if their credit score has improved significantly since the original loans were initiated. This reduces the overall cost of the loan.
  • Private consolidation loan costs can vary significantly, depending on whether the rate is variable or fixed, what fees, if any, are charged, and if there are prepayment penalties. Be sure to shop around for the loan with the best price overall.

Our Student Loan Comparison Calculator is designed to help you evaluate the costs associated with private borrowing.  

Special Direct Consolidation Loans

The U.S. Department of Education is offering this short-term consolidation opportunity through June 30, 2012.  To be eligible, your child must have at least one loan owned by the Department of Education and at least one commercially-held Federal Family Education Loan (FFEL) loan. 

Your child will be contacted if eligible for this special consolidation opportunity. Visit Special Direct Consolidation Loans for more information.


This information is general in nature and should not be construed as tax or financial advice. Consult your tax adviser or financial planner for more complete information.