How Student Loan Consolidation Works, Step By Step
We understand that the student loan consolidation process can be a confusing one. Here's a walkthrough that will help you understand how it works, and why consolidating your loans now will work out for years to come.
Apply. The first step in the consolidation process is to apply for a consolidation using our free, no-obligation application request. When you apply, you'll have the choice of receiving an application and information packet via eSignature or postal mail. Your packet will contain a consolidation application, as well as information about your discounts, and details on how your interest rate is computed.
Gather your federal student loan information. Due to recent changes at the Department of Education, you'll need to provide your student loan information with your consolidation application. Please see our loan locator page to help you gather this information.
Sign and mail. Once you've reviewed your application and discounts, sign and return it to us - either with eSignature online or by sending the paper application back to us using the included postage-paid envelope.
Quality check. Federal student loan consolidation requires compliance with the Higher Education Act - so we make sure all the necessary information on your application is accurate and complete.
Payoff statements. After your application has been checked for accuracy, we request payoff statements from your existing loan holders. These statements, called LVC's, tell us exactly how much you owe on each individual loan. Some payoff statements take up to 60 days to get back; that's why it's important that you return your application to us quickly - so we can get this part of the process underway. It's also very important, if you are currently making payments, to continue making payments on your existing loans until you receive your new payment information from us.
New loan. Once we know how much, down to the penny, you owe, we open a new federal consolidation loan in your name for the exact dollar amount you currently owe.
Payoff. We take the loan proceeds from your new federal consolidation and pay off each of your existing loan holders. Your existing loans are paid in full. This is why consolidation is a smart idea for your credit rating - it shows that you have successfully paid off all your existing student loans, which reduces the number of loans you owe, and shows you successfully paid off a series of debts, both of which increase your credit score. Documentation. After the payoff process is completed, we mail you your payment coupon booklet and consolidation loan information. You'll also receive your automatic checking account withdrawal enrollment form at this time - fill it out and send it back to receive your 0.25% interest rate reduction. |
