How can I benefit from Student Loan Consolidation?

One Lender & One Monthly Payment

With only one lender and one monthly payment due for student loans, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Federal Consolidation Loan.

Flexible Repayment Options

Borrowers can choose from multiple repayment plans with various term selections to repay their consolidation loan(s), including an Income Contingent Repayment and an Income-Based Repayment Plan. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a consolidation loan, borrowers can switch repayment plans at anytime. If you select the IBR Plan and want to change at a later date, your only option will be the Standard Plan.

No Minimum or Maximum Loan Amounts

There is no minimum amount required to qualify for a Federal Consolidation Loan!

Varied Deferment Options

Borrowers with consolidation loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a consolidation loan may renew those deferment options. In addition, borrowers may be eligible for additional deferment options if they have an outstanding balance on a FFEL Program loan made before July 1, 1993, when they obtain their first Direct Loan.

Reduced Monthly Payments

A consolidation loan may ease the strain on a borrower’s budget by lowering the borrower’s overall monthly payment. The minimum monthly payment on a consolidation loan may be lower than the combined payments charged on a borrower’s Federal education loans.

Retention of Subsidy Benefits

There are two (2) possible portions to a consolidation loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a consolidation loan.

Temporary In-School Consolidation Authority

During a one (1) year period, borrowers who meet certain requirements may consolidate loans that are in an in-school status into a Federal Consolidation Loan. Federal Consolidation Loans may be made under this temporary provision to borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011.

Borrowers will lose the grace period on a FFEL Subsidized/Unsubsidized Stafford Loan or Direct Subsidized/Unsubsidized Loan by consolidating the loan while it is in an in-school status. Similarly, PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose the six (6) month post-enrollment deferment period. Parent PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose eligibility to defer repayment while the student for whom the loan was obtained is in school.

Should I Consolidate?

Here are some factors you should consider when deciding if consolidation is the right program for you.

Are your monthly payments manageable?

If you have trouble meeting your monthly payments, have exhausted your deferment and forbearance options, and/or want to avoid default, a Federal Consolidation Loan may help you.

Too many monthly payments driving you crazy?

If you send payments to more than one lender every month, and want the convenience of a single monthly payment, consolidation may be right for you. With a Federal Consolidation Loan, you will have a single lender – the U.S. Department of Education – and a single monthly payment.

What are the interest rates on your loans?

If you have variable interest rates on your Federal education loans, you may want to consolidate. The interest rate for a Federal Consolidation Loan is fixed for the life of the Federal Consolidation Loan. The rate is based on the weighted average interest rate of the loans being consolidated, rounded to the next nearest higher one-eighth of one percent and cannot exceed 8.25 percent.

How much are you willing to pay over the long term?

Like a home mortgage or a car loan, extending the years of repayment increases the total amount you have to repay.

How many payments do you have left on your loans?

If you are close to paying off your student loans, it may not be worth the effort to consolidate or extend your payments.

Do I qualify?

To qualify for a Federal Consolidation Loan, borrowers must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment or default status. Loans that are in an in-school status cannot be included in a Federal Consolidation Loan.

Borrowers can consolidate most defaulted education loans, if they make satisfactory repayment arrangements with the current loan holders or agree to repay their new Federal Consolidation Loan under the Income Contingent or Income Based Repayment Plan.

Borrowers who do not have Direct Loans may be eligible for a Federal Consolidation Loan if they include at least one FFEL Loan and have been unable to obtain a Federal Consolidation Loan with a FFEL consolidation lender or have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them or intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program.

Borrowers who have only a Direct Consolidation Loan cannot consolidate again unless they include an additional loan.

What loans can be consolidated?

Eligible Loans

The following federal education loans are eligible for consolidation into a Federal Consolidation Loan:

Subsidized Loans:

  • Subsidized Federal Stafford Loans
  • Direct Subsidized Loans
  • Subsidized Federal Consolidation Loans
  • Direct Subsidized Consolidation Loans
  • Federal Insured Student Loans (FISL)
  • Guaranteed Student Loans (GSL)

Unsubsidized Loans:

  • Unsubsidized and Nonsubsidized Federal Stafford Loans
  • Direct Unsubsidized Loans, including Direct Unsubsidized Loans (TEACH) (converted from TEACH Grants)
  • Unsubsidized Federal Consolidation Loans
  • Direct Unsubsidized Consolidation Loans
  • Federal PLUS Loans (for parents or for graduate and professional students)
  • Direct PLUS Loans (for parents or for graduate and professional students)
  • Direct PLUS Consolidation Loans
  • Federal Perkins Loans
  • National Direct Student Loans (NDSL)
  • National Defense Student Loans (NDSL)
  • Federal Supplemental Loans for Students (SLS)
  • Parent Loans for Undergraduate Students (PLUS)
  • Auxiliary Loans to Assist Students (ALAS)
  • Health Professions Student Loans (HPSL)
  • Health Education Assistance Loans (HEAL)
  • Nursing Student Loans (NSL)
  • Loans for Disadvantaged Students (LDS)

Ineligible Loans

Some loans are always ineligible for consolidation. While these loans may not be included in a Direct Consolidation Loan, they may be considered in the calculation of the maximum repayment period under the Graduated or Extended Repayment Plan. These include but are not limited to the following:

  • Loans made by a state or private lender and not guaranteed by the federal government
  • Primary Care Loans
  • Law Access Loans
  • Medical Assist Loans
  • PLATO Loans