The Federal Consolidation Loan
The following information is for you and your parents. Please have your parents read this very important information about federal loans.• Even for undergraduate students and their parents, federal loans can be consolidated at this time when interest rates on Federal Stafford Loans and Federal PLUS Loans are at an historical low. On July 1st, the variable interest rate will be reset by the U.S. Department of Education and it is estimated that the interest rate will probably rise by at least 2%. The Federal Consolidation Loan program offers you an opportunity to change your interest rate from a variable rate to a fixed rate and, in some cases, lower your monthly payments. If you choose to consolidate at these low interest rates, your application must be received by June 30, 2005 to receive the fixed interest rate.
PARENTS:
If you have taken out PLUS loans for your child to attend Colorado College, you might want to consider converting your variable rate parent loan to a fixed rate loan even though your child may still be in school. We are recommending that you consider the advantages of pursuing the Federal Consolidation Loan since this may be the last opportunity that the loan will be offered at a fixed interest rate, as Congress is considering changing the current fixed rate structure to a variable rate structure. If you choose to consolidate your current parent loans and then take out new Federal PLUS Loans after July 1, 2005, you will have two different monthly payments to make, one for the consolidation loan and the other for new loans taken out. If you choose to consolidate your current loans and then borrow additional PLUS Loans in the future, you can consolidate those loans together for one payment, but note that the interest rate will be a weighted average of all of the loans. In most cases, Sallie Mae is the servicer of loans that parents have borrowed while their children attended CC. Information is enclosed which explains more about loan consolidation, including eligibility requirements, how to apply, and deferment / repayment options. If you have any questions, please contact Sallie Mae as soon as possible at 1.800.448.3533 or www.smartloan.com. Contact the servicer of your loan if it is not Sallie Mae.
STUDENTS:
Most Colorado College students have borrowed Stafford loans from a single lender, and most of those loans are with one of our preferred lenders, which are serviced by Sallie Mae (1.800.448.3533 or www.smartloan.com). If you have just one lender you must first request loan consolidation from that lender. If you have more than one lender, you should contact each lender or loan servicer to choose a consolidation program. Loan consolidation can reduce your monthly payments up to 58%, which will help you repay your loan obligations when you begin your career. Also, there are no prepayment penalties if you want to make additional payments after loan consolidation to hold down your overall costs. All Federal loans are eligible for student loan consolidation. These include Federal Stafford loans, Federal Direct Loans, and Federal Perkins Loans. Alternative or Private loans are not eligible for the federal loan consolidation program. Be careful if a Federal Perkins Loan is included in loan consolidation: 1) While the current Stafford Loan Interest rate is 2.77% for the in-school and grace period, the Perkins loan rate is 5%. If you consolidate both loan types, the new fixed interest rate will be a blended interest rate. A large Perkins Loan balance could actually raise the fixed interest rate. The loan consolidation interest rate is based on the weighted average of the current interest rates on the loans being consolidated, rounded up to the nearest 1/8%. 2) You may also lose the federal interest subsidies during deferment periods (such as graduate school). In addition, Federal Perkins Loans included in consolidation lose their eligibility for some federal forgiveness options. As an example, certain types of teachers can have their loans deferred while they are teaching and may receive up to 100% loan forgiveness. If you are an undergraduate student who will be continuing in the fall, or a student who will be entering graduate school in the fall, you can still consolidate your undergraduate loans now to take advantage of the low interest rates. Then, in the future, review your options to possibly re-consolidate your loans into one new loan under the existing legislation. Be aware that the U.S. Congress has the authority to change provisions with future legislation.jjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjj Remember, originate the consolidated loan application by June 30, 2005 if you want to take advantage of these current low interest rates! Colorado College, 14 E. Cache La Poudre, Colorado Springs, CO 80903 1.800.260.6458
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We have included information from Sallie Mae regarding their Smart Loan® Consolidation program since most CC students and parents have borrowed from a lender that Sallie Mae services. If you have chosen a different lender that is not serviced by Sallie Mae, please contact them as soon as possible to request information.