Home > Financial Aid > Student Loans > Student Loan Consolidation

Student Loan Consolidation

Loan consolidation can simplify the loan repayment process by allowing the borrower to combine several types of federal student loans and repayment schedules into one. The repayment process is simplified because there is only one per month. The interest rate on consolidated loans is often lower than what is currently paid. Borrowers in default on a federal student loan are eligible for a consolidation loan if certain conditions are met.

Note that a lender cannot refuse to consolidate your loans because of

  • - The number or type of eligible loans the borrower wants to consolidate
  • - The type of school attended
  • - The interest rate that would be charged on a consolidation loan
  • - The types of repayment schedules available

Loans That Can be Consolidated

  • - Direct Subsidized and Direct Unsubsidized Loans
  • - Subsidized and Unsubsidized Federal Stafford Loans
  • - Direct PLUS Loans
  • - PLUS loans from the Federal Family Education Loan (FFEL) Program
  • - Federal Nursing Student Loans
  • - Supplemental Loans for Students (SLS)
  • - Federal Perkins Loans
  • - Health Education Assistance Loans (HEAL)
  • - some existing consolidation loans

Some private lenders also consolidate loans, but these cannot be consolidated with federal loans. The Loan Origination Center’s Consolidation Department offers a complete list of loans eligible for Direct Consolidation.

www.loanconsolidation.ed.gov

Consolidation Periods

Federal loans can be consolidated during periods of repayment, grace, deferment, and forbearance. Loans cannot be consolidated while the borrower is still in school. If you want to consolidate a defaulted loan, you have to either make satisfactory repayment arrangements on the loan with your current loan servicer before you consolidate, or repay your new Direct Consolidation Loan under the:

  • - Income-Based Repayment Plan
  • - Pay As You Earn Repayment Plan
  • - Income-Contingent Repayment Plan
  • Advantages vs. Disadvantages of Federal Loan Consolidation

    Advantages

    • - One Monthly Payment
    • - Lower Monthly Payments
    • - Longer Repayment Period
    • - Fixed Interest Rate

    Disadvantages

    • - Greater Total Money Repaid - Interest accumulated over a longer period when repayment period is extended.
    • - Loss of Borrower Benefits - Borrower loses cancellation benefits on Perkins Loan. Interest rate discounts and principal rebates can also be lost.

    Interest Rates and Fees

    The interest rate for federal loans is set according to a formula established by federal statute. The fixed rate is based on the weighted average of the interest rates on the loans at the time the borrower consolidates, rounded up to the nearest 1/8%. The interest rate does not exceed 8.25%. The consolidation rate is fixed for the life of the loan, which protects the borrower from future increases in variable rate loans but does now allow them to benefit from future decreases in variable rates. There are no application fees or prepayment penalties.

    Repayment

    • - Repayment begins within 60 days of the loan disbursement
    • - Payback term ranges from 10-30 years depending on the amount of educational debt being repaid and selected repayment options
    • - Loans can be repaid in a shorter amount of time is borrower chooses to do so
    • - Once consolidated, federal loans cannot be unconsolidated

Latest College & Financial Aid News

Grinnell's Gifting Policies Under Fire Over Gun Connection

February 20, 2018

by Susan Dutca

Photo courtesy of Galin Education

Grinnell College's Ignite Program, which allows local Pre-Kindergarten - 6th-grade students to come to campus for courses created and taught by college students, is facing criticism for being funded by a generous gift from the President of the National Rifle Association, Pete Brownell. As a result of the flap, the college revised its gift acceptance policy. [...]

Mom Agreed to Pay $1.5M to Elite College Consulting Firm

February 14, 2018

by Susan Dutca

A mom who agreed to pay $1.5 million to a college-admissions consultant to help her child get into a prestigious prep school and Ivy League College is now being sued for allegedly paying only half the fee. The Manhattan-based firm, The Ivy Coach, says the family is part of the "international aristocracy who have enlisted Ivy Coach's premium services." [...]

Student Group Cancels Controversial Debate at University of Chicago

February 6, 2018

by Susan Dutca

A controversial immigration debate was canceled this week by a student group at The University of Chicago - a university which "prides itself on protecting free speech, even offensive speech." The Edmund Burke Society, a conservative parliamentary debating society, canceled the debate, claiming it "could not assure an orderly event," particularly following the uproar over how the group had described the event. [...]

Last Reviewed: February 2018