What is Federal Student Loan Consolidation?

If you find yourself with multiple federal student loans. You have an opportunity to consolidate (combine) them into one one loan with a fixed interest rate.

There is no application fee to complete a Direct Consolidation Loan application.

How to consolidate your student loans:

• Complete the free Federal Direct Consolidation Loan Application
• Complete the Promissory Note (found within the application)
• Confirm the loans that you want to consolidate and agree to repay the new Direct Consolidation Loan
• Once the consolidation is complete, you will have a single monthly payment on the new Direct Consolidation Loan
• You must complete the application in a single session. Average time is 30-minutes.

A Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. There is no cap on the interest rate of a Direct Consolidation Loan.

What do I need in order to consolidate my student loans?

• Verified FSA ID
• Personal Information (home address, email, telephone number, best time to reach you)
• Financial Information (adjusted gross income, new income, no income, marriage status)

Why do people consolidate?

• One monthly payment instead of multiple payments
• Simplify loan repayment by giving you a single loan with just one monthly bill.
• Lower your monthly payment by giving you a longer period of time (up to 30 years) to repay your loans.
• As part of the new changes in the Public Service Loan Forgiveness (PSLF) program, if you have outstanding FFEL and/or Perkins loans you must consolidate these loans into a Direct Consolidation Loan by Oct. 31, 2022 and then submit a PSLF form to your loan servicer. This is important, because you cannot receive credit for payments under this limited-time period if you consolidate after that date.
• Switch any variable-rate loans you have to a fixed interest rate.

Downsides of Consolidating to Consider

• Because consolidation usually increases the period of time you have to repay your loans, you will likely make more payments and pay more in interest than would be the case if you didn’t consolidate.
• When you consolidate your loans, any outstanding interest on the loans that you consolidate becomes part of the original principal balance on your consolidation loan. Interest may accrue on a higher principal balance than might have been the case if you had not consolidated.
• Consolidation may also cause you to lose certain borrower benefits—such as interest rate discounts, principal rebates, or some loan cancellation benefits—that are associated with your current loans.
• When choosing consolidation, you don’t have to consolidate all of your eligible loans.
• If you’re paying your current loans under an income-driven repayment plan, or if you’ve made qualifying payments toward Public Service Loan Forgiveness, consolidating your current loans will cause you to lose credit for any payments made toward income-driven repayment plan forgiveness or PSLF.

Need further help?
To ask questions about consolidating your loans before you apply for a Direct Consolidation Loan, contact the Student Loan Support Center at 1-800-557-7394.

Resources:
Learn more about loan consolidation.
List of eligible loans.
Interest rates on a consolidation loan.

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