Federal Loan Consolidation

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 better manage their loan repayment. But loan consolidation isn’t right for everyone. Weigh all of the information before you choose to consolidate.

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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. 
  • 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. There are also a variety of other options, including income-based repayment plans that look at a borrower's income levels when determining repayment.
  • Parents can consolidate their Federal Direct PLUS Loans. (Parent PLUS loans cannot be consolidated with federal loans taken out by student borrowers.)
  • There is no cost to consolidate. 
  • Students can apply for Direct Loan consolidation online 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:

  • By extending the repayment period, you are likely to pay more interest over the life of the loan. The total cost of your loans will be higher.
  • You may give up some of the benefits of your individual loans, such as the forgiveness and deferred interest benefits of the Perkins Loan.  They will be consolidated in the umsubsidized portion of the Direct Consolidation Loan, so borrowers will be responsible for interest accruing during deferment periods.
  • Private educational loans cannot be included in a federal loan consolidation. To learn how to consolidate private loans, contact your private loan lender directly. 

Rehabilitation vs. Consolidation:  There are benefits to rehabilitating a defaulted loan BEFORE consolidation.

  • If you consolidate a defaulted loan without rehabilitating it:
    • A borrowers credit record will continue to show that the loan was in default but then “paid in full.”
    • This can remain on the credit report for up to seven years
  • Rehabilitating a defaulted loan BEFORE consolidating it:
    • Rehabilitating a defaulted federal loan requires the borrower to make at least nine full payments of an agreed amount
    • After the borrower rehabilitates the defaulted loan, the loan holder will update the credit report to no longer reflect the default status

More information about considering loan consolidation can be found on the Federal Student Aid website.


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.

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The easiest way to apply for loan consolidation is online through the website using your U.S. Department of Education Personal Identification Number (PIN). You can request a paper application by calling 1-800-557-7392.

Sign in at and either go to the My Account page to access the Loan Consolidation link or find the link under the Tools and Resources on the Home page. During the consolidation process, you will:

  • Select one of four loan servicers: FedLoan/PHEAA, Great Lakes, Nelnet or Sallile Mae. This will be the servicer throughout the life of your consolidated loan. 
  • Select the specific loans you wish to consolidate and choose your repayment plan. (For more about repayment plans, visit the Repaying Your Student Loans page.) If you choose an income-based repayment option, you may allow the IRS tax database to populate this section or retrieve IRS information and enter it manually.
  • Read and approve Terms and Conditions.
  • Submit personal information and two references.
  • Review a summary of consolidated loans and sign your promissory note.

What you will need:

  • Name, address, and telephone number for two references with different U.S. addresses
  • The lender name, address, and current balance information for each education loan that you wish to consolidate. (If you apply online, much of this information will be pre-populated for you. The View Student Loan Summary page of Wolverine Access also lists this information. (After logging in, select Financial Aid > Aid Year > Loans > View Student Loan Summary.)  You may also refer to your monthly Direct Loan statements, your Direct Loan Servicer account information or your promissory notes.
  • For the Education Loan Indebtedness section of the application, list the following for each of your loans: the loan holder, loan servicer's name, address, and telephone number. (You may also list private education loans to have them considered for this purpose, but these loans cannot be consolidated with your federal loans.) 
  • For federal Direct Loans (Subsidized, Unsubsidized, and PLUS) the Direct Loan Servicer contact information is shown on your most recent Direct Loan statement. You can find this information at the NSLDS website. Log in with your PIN.
  • For federal Perkins, Health Professions, and Nursing Student Loans you have had while at University of Michigan, list:

Student Loan Operations (Loans & Collections)
University of Michigan
6061 Wolverine Tower
3003 S. State Street
Ann Arbor, MI  48109-1287



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 and complete the opt-out process. For more information, see Privacy Choices for Your Personal Financial Information on the Federal Trade Commission website or visit the FTC's student loans page.

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