Student Loan Consolidation

What is student loan consolidation?

This option allows students to consolidate multiple federal student loans with different repayment schedules into just one loan. This consolidation option allows for students just to make one monthly payment instead of multiple payments on multiple student loans.

When can a student Consolidate?

You can consolidate during your grace period, once you've entered repayment, or possible during deferment or forbearance. Please see deferment and forbearance section.

How do students consolidate loans?

FFEL Consolidation Loan - You (or your parents, for a FFEL PLUS Consolidation Loan) can contact the consolidation department of a participating lender for an application and more information. If the same FFEL loan holder holds all the loans you (or your parents) want to consolidate, usually you must obtain your consolidation loan from that holder.

Direct Consolidation Loan - You (or your parents, for a Direct PLUS Consolidation Loan) can contact the Direct Loan Origination Center 's Consolidation Department (see above).

Downsides to Loan Consolidation:

  1. Computation of the interest rate may be against the student. The interest rate is a weighted average of the interest rates on the loans you consolidate, rounded up to the nearest one-eighth of a percent. The interest rate does not exceed 8.25 percent.
  2. If students qualify for certain discharge provisions, such as in Perkins Loans, but do not discharge before Loan Consolidation then students lose that option once they consolidate.
  3. Consolidation significantly increases the total cost of repaying your loans. Because you can have a longer period of time to repay, you'll pay more interest. In fact, consolidation can double total interest expense. So, compare the cost of repaying your unconsolidated loans with the cost of repaying a consolidation loan.