Consolidating a Perkins loan

Some borrowers are afraid that they’ll “lose” the lower Perkins interest rate if they include a Perkins or NDSL in a Consolidation Loan. Because the interest rate on a Consolidation Loan is the weighted average of the interest rates on the prior loans, there should be no significant difference in the amount of interest you pay on that Perkins amount before and after it’s consolidated.
However, you should bear in mind that you will lose some of the deferment and cancellation provisions on your Perkins loan. For instance, the Consolidation Loan doesn’t have cancellation provisions for VISTA and Peace Corps volunteers, teachers at low-income elementary or secondary schools, or for full-time nurses, medical technicians, and law enforcement/corrections officers.Because Consolidation Loans may have repayment periods as long as 30 years, your monthly repayment amount on the Perkins portion of your loan may be less than what you were previously paying on that loan.
However, remember that extending the repayment period usually increases the total amount of interest that
you’ll be paying on the loan.
Endorser for PLUS loan consolidation
If you had to get an endorser on the PLUS portion of the original Consolidation Loan, you must use the same
endorser for the added PLUS Loan. If an endorser was not originally required but is required for the added
PLUS loan, the endorser must agree to repay the entire PLUS Consolidation Loan.
Provisions for older loans
The interest rate for a Federal Consolidation Loan made from July 1, 1994 to November 13, 1997 was the
weighted average of the interest rates on the loans being consolidated (rounded up to the nearest whole
percent) or 9%. When calculating the weighted average of interest rates, the consolidating lender must use
the interest rates that are in effect for each loan at the time the loan is paid in full for consolidation.
The interest rate for a Federal Consolidation Loan made from November 14, 1997 to September 30, 1998 is the bond equivalent rate of 91-day Treasury bills sold at final auction before June 1, plus 3.1%. The interest rate may not exceed 8.25%. If your lender received your Consolidation Loan application before January 1, 1993, you are responsible for the interest on the loan during periods of deferment. If your lender received your Consolidation Loan application from January 1, 1993 through August 9, 1994, the Department pays the interest on your loan during periods of deferment. (These interest payments do not cover any portion of the Consolidation Loan that represents aformer HEAL loan.) For loan applications received on or after August 10, 1994, the Department pays the interest on the Consolidation Loan during periods of deferment if the loan is made up exclusively of subsidized Stafford Loans.

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