Loan consolidation is a method of refinancing federal educational loans. In a loan consolidation, the loans included in consolidation are repaid in full with a new loan that has a fixed interest rate. The new consolidated loan is then payable according to the terms of the new loan, sometimes with the option of a longer repayment period.

Interest rates

The interest rate for both Direct and FFEL Consolidation loans is a fixed rate for the life of the loan. the fixed rate is based on the weighted average of the interest rates on all of the loans you consolidate, rounded up to the nearest one-eighth of 1 percent. However, the interest rate will never exceed 8.25%.

Loans that can be included

Loans eligible for consolidation include Stafford/GSL and FISL Loans, HEAL Loan, Perkins/NDSL Loan, Nursing Loans, SLS and ALAS Loans, HPSL Loans, LDS Loans, PLUS Loans (students and parents consolidate separately), GPLUS Loans and Consolidation Loans.

Things to consider

Loan consolidation can offer you benefits to help manage your education debt.

  • Make lower monthly payments by increasing the repayment period
  • Make one single loan payment a month
  • Have only one lender for all your educational loan debt
  • Lock in a lower, fixed interest rate

There are times when consolidation may not be right for you.

  • Certain benefits, such as cancellation benefits, and interest subsidies, may no longer be available
  • For some loans, you may lose your grace period and some deferment and cancellation provisions
  • If you are close to repaying off your loans, it might not make sense to extend your repayment period as it may add additional interest costs

To apply

You can apply on the Student Loans website or if you have direct loans only you can call 1-800-557-7392 to apply. You can also complete a paper application by calling the number above to request the application. If you wish to keep prior consolidation loans separate you should apply on-line or with a paper application. Once your consolidation has been processed, the Direct Loan Servicer will send you a list of the loans that are included in the consolidation. Please review this list carefully to make sure only the loans you asked to be consolidated are being added to the new consolidation loan.