Consolidating your student loans can not only simplify your finances by allowing you to make just one payment each month, but it can also lower your monthly payment by lengthening your repayment term. When you have a Direct Loan issued by the federal government and a loan through Sallie Mae, you might be able to consolidate them depending on what type of Sallie Mae loan you have.
Types of Loans
Sallie Mae loans come in two major varieties, and the type you have will affect whether you can consolidate your Sallie Mae loan with your federal Direct Loan. The first type of loan is the private student loan from Sallie Mae. This is not a Stafford Loan from the federal government, but rather a loan that you got from Sallie Mae on your own initiative. The second type of loan is a loan through the Federal Family Education Loan program. This is a Stafford or PLUS loan issued with funds from Sallie Mae but backed by the federal government. These loans were issued only until June 30, 2010.
Federal Direct Consolidation Loans
You can only consolidate Sallie Mae loans issued through the FFEL program into a Direct loan. This is because the federal government only consolidates federal loans, not private loans. You can consolidate multiple Sallie Mae FFEL loans together or you can consolidate at least one Sallie Mae loan with at least one federal Direct Loan. After consolidating, you will make all of your payments directly to the federal government, not to Sallie Mae.
None of the loans that you are consolidating together, including your Sallie Mae FFEL loan and any federal Direct Loans, can have an in-school status. You must wait until after your graduation date to consolidate loans through the Direct consolidation program. The one exception to this rule is that between July 1, 2010, and July 1, 2011, borrowers could consolidate two or more loans if they fell into at least two of three major categories: Direct Loans, FFEL loans and FFEL loans bought by the federal government.
Private Loan Options
If your Sallie Mae loans are private student loans instead of FFEL loans issued by Sallie Mae, you must use consolidation options other than the federal Direct consolidation loan. You will need to apply for a consolidation loan with a private lender, which could be Sallie Mae or a different lender. Your interest rate for the consolidation loan will be based on your credit score and, if applicable, your co-signer's credit score. If you own a home, you could consolidate student loans by taking out a home equity loan, which generally has a low interest rate. However, this adds the risk of losing the home if you fail to repay your loan.