When should you consolidate?
There are no deadlines in the Federal Consolidation Loan program. There are several things to keep in mind, however, regarding when to consolidate. Your loans must be fully disbursed to be eligible for a Federal Consolidation Loan. They also must be in their grace period or in repayment (including deferment or forbearance).
It is best for you to consolidate while your Federal Stafford Loans are still in their grace period, when they still have the lower in-school interest rate.
If you are consolidating your federal student loans during your grace period but are worried about losing your grace period, rest assured. Section D on the Federal Consolidation Loan application includes a question that allows you to enter your grace period end date. If a date is provided in this question, the lender won’t complete processing of the application or fund the loan until near that date. Therefore, you can apply for the consolidation loan at any time during your Federal Stafford Loan grace period, qualify for the lower in-school interest rate, and postpone the start of repayment on the debt until near the end of your grace period.
The longer you postpone funding of your Federal Consolidation Loan, however, the more interest will accrue on any unsubsidized Federal Stafford Loans (or any other federal student loans for which you are responsible for the interest) that are included in your Federal Consolidation Loan. You should also know that, while funding of your Federal Consolidation Loan is pending, interest may accrue on your Federal Stafford Loans at a different rate than the rate used to calculate your Federal Consolidation Loan interest rate.
If your loans are already in repayment, federal student loan consolidation may still be beneficial. It allows you to fix the interest rate on your federal student loans while rates are still low.