Students who have more than one federal student loan may want to consider combining the loans into one Direct Consolidation Loan. Consolidating different types of loans into one monthly payment can help borrowers to better manage their repayment. But loan consolidation isn’t right for everyone. Weigh all of the information before you choose to consolidate.

A Direct Consolidation Loan combines one or more federal loans into a single loan with one interest rate and one monthly loan payment.

Consolidation has a number of benefits:

• You can combine loans of different types into one fixed-rate loan (see below for interest rate information).  You can even consolidate a single small balance loan.
• You can also have more than one consolidated loan.  If you have consolidated before, you may choose not to include your previously consolidated loan in your new loan consolidation.  Use the online calculator on the Federal Loan Consolidation website to help determine which loans to include in your new consolidation loan.
• Borrowers can choose the same standard 10-year maximum repayment term as they have with their current Direct Loan to keep the cost of borrowing low when repayment begins.
• Parents can consolidate their Federal Direct PLUS Loans. 
• There is no cost to consolidate. 
• Students can apply for Direct Loan consolidation online in as little as 8 minutes or by completing a paper form (see below).
• You can receive a .25 percentage point interest rate reduction when you sign up for an Electronic Debit Account.

Consolidation has a few drawbacks to consider:

• By extending the repayment period, you are likely to pay more interest over the life of the loan. Thus, the total cost of your loans will be higher.
• By consolidating, you may give up some of the benefits of your individual loans, such as the forgiveness and deferred interest benefits of the Perkins Loan.
• Private educational loans cannot be included in a federal loan consolidation. To learn how to consolidate private loans, contact your private loan lender directly. 

The fixed interest rate of a consolidation loan is the weighted average interest rate on all the loans you are consolidating. See the federal Direct Consolidation Loans website for current interest rate calculations. You can also use their online calculator to estimate your interest rate and determine whether consolidation will save you money.

Remember that if you consolidate your Perkins, Health Professions, or Nursing Loans, you will lose the cancellation provisions of these loans. This could be disadvantageous for certain students, such as those who plan to serve in the Armed Services or Peace Corps.  For information about Perkins Loan cancellation, see Your Federal Student Loans: Learn the Basics and Manage Your Debt. For information about Health Professions Loan and Nursing Loan cancellation, see your promissory note.

 (return to top of page)

The easiest way to apply for loan consolidation is online through the Federal Direct Consolidation Loans website using your U.S. Department of Education Personal Identification Number (PIN). The website also provides a paper application, or you can request a paper application by calling 1-800-557-7392.

You may receive mail from private loan companies offering consolidation loans.  Many of these solicitors use language implying that they are government-operated entities. They are not. These companies obtain your name from credit-reporting agencies such as Equifax, Experian or TransUnion. You may stop them from sesnding these offers by visiting OptOutPrescreen.com and complete the opt-out process. For more information, see Privacy Choices for Your Personal Financial Information on the Federal Trade Commission website.

 (return to top of page)