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Student Loan Consolidation

Loan consolidation can simplify the student loan repayment process by allowing you to combine several types of federal student loans and repayment schedules into one. The repayment process is simplified because there is only one monthly payment. Student loan consolidation may be a great solution for you if you are looking to conveniently and easily manage multiple loans. Borrowers in default on a federal student loan are eligible for a consolidation loan if certain conditions are met. If you choose to consolidate your student loans, you can apply for a Direct Consolidation Loan through StudentLoans.gov.

To be eligible for a Direct Consolidation Loan, you:

  • Must have at least one federal loan that is eligible for consolidation
  • Must be in the student loan repayment or the grace period
  • Must either make acceptable repayment arrangements before you consolidate, or you must agree to repay your new Direct Consolidation Loan under one of the income-driven loan repayment plans if your student loan is in default.
  • Must have your wage garnishment lifted or have the judgement vacated if your defaulted student loans are being collected through garnishment of your wages.

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 companies may offer to help you apply for a Direct Consolidation Loan for a fee. Be aware that these companies have no affiliation with the U.S. Department of Education or ED's consolidation loan servicers. Just like applying for scholarships, you never have to pay for help in getting a Direct Consolidation Loan.

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 (IBR)
  • Income-Contingent Repayment Plan (ICR)
  • Pay As You Earn Repayment Plan (PAYE)
  • Revised Pay As You Earn Repayment Plan (REPAYE)
  • 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 a Direct Consolidation Loan has a fixed rate for the life of the loan. 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%. There is no cap on the interest rate of a Direct Consolidation Loan.

    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

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Last Reviewed: January 2020