Student loan consolidation simplifies payments

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Ask a Lender
February 6, 2017 | Updated September 25, 2017


Key Points

Benefits of Direct Loan Consolidation of your federal student loans

  • Borrowers can combine all of their federal student loans into one loan.
  • Borrowers can extend the time to repay their loans up to 30 years.
  • There are no application fees for a Direct Consolidation Loan.
  • Consolidating through the program can open up alternative payment plans.


Borrowers who have multiple federal student loans can consolidate them all into a single Direct Consolidation Loan through the federal student loan program.

This process allows you to combine multiple monthly payments into a single payment and can even lower those payments because Direct Consolidation Loans can have terms as long as 30 years. Increasing how long you take to pay off your student loans, however, can increase the total amount you will pay over time.

Who can consolidate

Any borrower who has more than one eligible federal student loan and is no longer in school may consolidate those loans. The eligible loans include all Direct and Stafford loans, Perkins loans, Nursing loans, Health Education Assistance loans and Direct PLUS loans awarded to students (not those awarded to parents). If any of your loans are in default, however, you must make arrangements to bring those loans current or you will be restricted in the type of repayment plans you have under the consolidation loan.

Private education loans — those taken out from banks or private lenders and not through the various federal student-aid programs — cannot be consolidated through the federal consolidation program. Federal loans, however, can be consolidated or refinanced through a private lender. Compare lenders to see if the rates and terms are better than through Federal Direct Consolidation. Remember that a federal loan that has been consolidated or refinanced privately is no longer eligible for federal repayment programs.

Payment considerations

The interest rate on Direct Consolidation Loans is a fixed rate that will not change over the life of the loan. This rate is based on a weighted average of the rates on all of the loans being consolidated. Borrowers might be able to get a lower interest rate by refinancing all of their federal student loans into a single private loan, but there are no application fees for Direct Loan Consolidation, which can save money up front versus refinancing.

Consolidating through the federal student aid program provides several repayment options, which can help borrowers with different financial needs. Consolidation loans are eligible for the graduated repayment plan, which has lower payments to start; the pay-as-you-earn, income-based and income-contingent plans, which have payments based on your discretionary income; and the extended plan. Many of these plans allow borrowers up to 30 years to repay the loan.

Finally, before consolidating your federal student loans, check for any benefits offered through the original loans. Some federal student loans offer loan forgiveness, rate reductions, or even rebates under certain circumstances. Many of these borrower benefits will be lost if those loans are consolidated into a Direct Consolidation Loan.

Loan consolidation can open up alternative repayment plans, lower your monthly payment by increasing the time you have to repay and reduce the number of payments you have to send out each month. Plus, there is no charge for consolidating. It may not be right for everyone, however. So be sure to check into student loan refinancing as well.

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