Repayment plans and total interest

The advantage of a longer repayment period is lower monthly payments. On the other hand, you’ll be paying more in interest charges over a longer repayment period. For instance, if you consolidate $10,000 in student loans that you were going to repay in 10 years, your total repayment amount will increase from $13,626 over 10 years to $15,680 over 15 years. (Based on a 6.5% interest rate.) The additional interest has an even greater effect for larger loan amounts. For instance, consolidating $20,000 in Stafford loans to a 15-year Federal Consolidation Loan will increase your total repayment from $27,252 to $35,787. To make sure that you understand your choices, you should use an on-line repayment calculator that shows you the total interest you’ll pay for repayment periods of different length. If you’re concerned about the amount of interest you’ll be paying, you do have the option to request that your lender set a shorter repayment period on your Consolidation Loan. On the other hand, you may decide to accept the higher interest cost over the long term in order to reduce your current monthly payment.
If you’re having difficulty making your current loan payments but expect your income to increase significantly in a few years, there are alternatives to consolidation. For instance, you may want to switch your current loans to a graduated repayment plan or an income-sensitive repayment plan, rather than consolidating.Consolidation and loan limits There are no minimum or maximum loan limits that apply to Federal Consolidation Loans. The loan’s principal balance equals the sum of the amounts that your Consolidation lender will pay to the holders of the loans being consolidated. For instance, if you consolidate undergraduate Stafford Loans that have a
total remaining balance of $12,000 with $15,000 in graduate Stafford Loans, you will owe a total of $27,000 on your Consolidation Loan.
Consolidation doesn’t change your aggregate loan limits—your Consolidation Loan counts towards the aggregate Stafford Loan limit, just as any individual loans would. However, keep in mind that your outstanding balance on any unsubsidized Stafford loans that were consolidated may have included capitalized interest, which is not counted towards your aggregate loan limit. Thus, you may need to work with your school to determine whether the amount of your Consolidation loan shown in NSLDS includes capitalized interest.

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