Consolidating Perkins & Health Professions Loans

Perkins and health professions loan holders must consider several factors before looking for federal loan consolidation rates. We'll explain why these types of loans are unique here.

Consolidating Perkins Loans

Most direct federal consolidation loans will not allow borrowers to consolidate a Perkins loan by itself. The borrower must include at least one other type of federal student loan in order to qualify. Before looking for federal loan consolidation rates for your Perkins loans, you should think about the following:

• The cancellation benefits of Perkins loans are lost when they are consolidated. For example, a Perkins loan holder may be able to discharge his/her loans by performing certain types of public service. This benefit would disappear upon consolidating.
• The typical grace period of a Perkins loan is six to nine months. As soon as you consolidate, whatever portion of your grace period that remains is lost.
• When a Perkins loan is placed in deferment status, interest stops accruing. With consolidation loans, however, borrowers must still pay the interest that accumulates during any deferment periods.
• Perkins loans tend to have reasonable interest rates but also have comparatively inflexible repayment periods of ten years.

Consolidating Health Professions Loans

When combined with direct federal loans, student loans sponsored by the Department of Health and Human Services may qualify for consolidation. Loans eligible for federal consolidation include Health Professions Student Loans (HPSL), Loans for Disadvantaged Students (LDS), Health Education Assistance Loans (HEAL), and Nursing Student Loans (NSL). Before holders of health profession loans sign up for federal loan consolidation rates, they should consider the following issues:

• With HEAL loans that have variable interest rates, there is no rate maximum. If interest rates climb, this could result in a serious financial burden on the loan holder. By contrast, federal consolidation loans have fixed rates that cannot exceed a certain percentage.
• The Department of Health and Human Services subsidizes the interest on some types of health professions loans. Consolidating will result in the loss of this interest subsidy.
• Interest will not accrue during deferment on health professions loans that are consolidated.
• The deferment options associated with health professions loans are lost upon consolidation, but the borrower gains the new deferment benefits of the consolidation loan.