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Student Aid FAQ

What are the benefits of federal student loan consolidation?
Federal consolidation loans allow borrowers to combine several federal student loans into one loan to streamline loan repayment. The monthly payment amount may decrease because repayment can be spread over a longer time period. Because there are no penalties for prepaying the loan in full or in part, borrowers may make larger monthly payments or extra payments if they wish. Borrowers may also change repayment plans at least once a year.

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Do I have to repay a Federal Student Loan?
By signing the Master Promissory Note (MPN) for a Direct Loan, the borrower promises to repay the loan. The Master Promissory Note is a legally binding agreement. It specifies the terms of the loan.

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Does a private consolidation loan save the borrower money?
It depends. A private consolidation loan may reduce the monthly payment by increasing the term of the loan. But, while this may make the monthly payment more affordable, it does not save the borrower money. Increasing the term of the loan often leads to more interest being charged over the life of the loan.

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How long is the repayment term for private consolidation loans?
The length of the repayment term varies by lender, typically 15, 20 or 25 years. Lenders offering fixed interest rates may have shorter repayment terms. The repayment term may depend on the amount borrowed.

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What's the difference between a FAFSA and a Renewal FAFSA?
The Renewal FAFSA is available to students who filed the Free Application for Federal Student Aid (FAFSA) during the previous award year. It uses demographic data from the previous year’s FAFSA to pre-fill this year’s FAFSA. This can significantly reduce the time it will take to complete the FAFSA.

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When do I have to start repaying my student loans?
Most student loans enter repayment within 6 months of the borrower graduating or dropping below half-time enrollment.

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Are there any penalties for prepayment of private consolidation loans?
As with all federal and private student loans, there are no prepayment penalties for making extra payments or paying off the balance early.

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Does the private consolidation loan have to be approved by the school?
Private consolidation loans are generally not school-certified since they are refinancing existing private student loan debt after the student has graduated.

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Is a cosigner required to obtain a private consolidation loan?
Private consolidation loans are similar in many ways to private student loans. If the primary borrower does not satisfy credit criteria, a cosigner may be required. Recent college graduates may not have long enough of a credit history to qualify without a cosigner. Even if the borrower can qualify for a private consolidation loan without a cosigner, adding a cosigner may yield a lower interest rate.

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Do private consolidation loans offer cosigner release?
Some lenders offer cosigner release as an option on their private consolidation loans. Typically, these require 12, 24 or more months of on-time payments by the primary borrower. The primary borrower must also satisfy credit criteria. In practice, it is difficult to qualify for cosigner release. The credit criteria are often very strict because the lenders are aware that the cosigner may have been secretly helping the primary borrower make his or her monthly loan payments. The last thing the lender wants to do is have the primary borrower default a few months after the cosigner release is effective.

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