A Direct Consolidation Loan allows you to combine multiple federal education loans into one loan. Before making the decision to consolidate your loans, you’ll want to carefully consider whether loan consolidation is the best option for you. Keep in mind, once your loans are combined into a Direct Consolidation Loan, they cannot be removed.
Advantages of Consolidating Your Student Loans
- It’s Free! It’s free to apply to consolidate your federal student loans. If you are contacted by someone offering to consolidate your loans for a fee, you are not dealing with the U.S. Department of Education.
- Simplified Payments. You’ll have a single monthly payment and a single lender (the U.S. Department of Education) instead of multiple payments and multiple lenders.
- Fixed Interest Rate. Direct Consolidation Loans have a fixed interest rate, meaning your interest rate won’t change year to year. The fixed interest rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1 percent.
- Lower Monthly Payments. You may get a longer time to repay your loans, often resulting in lower monthly payments.
- Qualify for Income-Driven Repayment or Loan Forgiveness.
Some benefits such as the Pay As You Earn Repayment Plan and Public Service Loan Forgiveness Program are only available for Direct Loans. If you choose to consolidate your Federal Family Education Loan Program loans into a Direct Consolidation Loan, you may be able to take advantage of these programs.
Disadvantages of Consolidating Your Student Loans
- More Interest Paid Over Time. You will likely pay more money in interest over the life of the loan. The amount of time you have to repay your Direct Consolidation Loan can vary from 10-30 years depending on the amount of your Direct Consolidation Loan and the amount of your other student loan debt. The longer it takes to repay your loan, the more you will make in interest payments.
- Loss of Borrower Benefit. You may lose any borrower benefits, such as interest rate discounts, principal rebates, or some loan cancellation benefits, offered with the original loans.
In weighing your options, be sure to compare your current monthly payments to what your monthly payments would be if you consolidated your loans. If you’re just interested in temporarily lowering your monthly payment, consolidation might not be the answer. Contact your loan servicer to consider alternative options such as switching repayment plans or requesting a deferment or forbearance.
What are Direct Loans?
Direct Loans are student loans provided by the Department of Education. Since July 2010, almost all federal student loans are made under this program—in full, called the William D. Ford Federal Direct Loan Program.
Though the Direct Loan Program existed long before 2010, there was another bigger federal student loan program that most students relied on to finance their education: the Federal Family Education Loan (FFEL) Program.
Under the FFEL Program, loans were made by banks and ultimately guaranteed by the taxpayer in case you didn’t make your payments. In 2010, this program ended.
Loans from both of these programs are federal student loans. The main way the programs differ is in who made you the loan in the first place. Most of the benefits in the Direct Loan Program are available in the FFEL Program. However, FFEL Program loans are not eligible for Public Service Loan Forgiveness or the best income-driven repayment plans. This is where loan consolidation can help. It will effectively convert your FFEL Program loans into Direct Loans.
How do I find out which type(s) of federal student loans I have?
- Go to StudentAid.gov/login
- Log in using your FSA ID (You can’t use your Federal Student Aid PIN anymore!)
- Scroll to the loan summary section. Go through each of the loans that are listed. Use the list below to see if you need to consolidate any of your loans to qualify for the best repayment options.
|Loans You Don't Need to Consolidate for the Best Benefits||Loans to Consolidate for the Best Benefits|
|Direct Stafford Subsidized||FFEL Stafford Subsidized||Federal Perkins|
|Direct Stafford Subsidized (SULA Eligible)||FFEL Stafford Unsubsidized||Perkins Expanded Lending|
|Direct Stafford Unsubsidized||FFEL Stafford Non-subsidized||Income Contingent|
|Direct PLUS Graduate||FFEL PLUS Graduate||FFEL Supplemental Loan (SLS)|
|Direct Consolidated Subsidized||FFEL Refinanced||Federally Insured (FISL)|
|Direct Consolidated Subsidized (SULA Eligible)||National Defense Loan (Perkins)|
|Direct Consolidated Unsubsidized||National Direct Student Loan (Perkins)
Don't be fooled. This is not actually a "Direct Loan" as we mean the term today.
|Direct Unsubsidized (TEACH)||FFEL Consolidated
If this includes a PLUS Loan made to parents, if you re-consolidate this loan into a Direct Consolidation Loan, the only income-driven plan the consolidated term will qualify for is the income-contingent repayment plan.
This is a parent loan. If you consolidate this loan into a Direct Consolidation Loan, the only income-driven plan the consolidated loan will qualify for is the income-contingent repayment plan.
|Direct PLUS Parent
This is a parent loan. Though it is a Direct Loan, it must be consolidated. If consolidated, the only income-driven plan the consolidated loan will qualify for is the income-contingent repayment plan.
|Direct PLUS Consolidated
This is a parent loan. Though it is a Direct Loan, it must be re-consolidated. If consolidated, the only income-driven plan the consolidated loan will qualify for is the income-contingent repayment plan.
What should I consider before consolidating?
First, evaluate whether you want any of the benefits that are available only in the Direct Loan Program. Consolidating your loans can increase the amount of interest that accrues on your loans, so if you’re not interested in these programs, you may not want to consolidate. Also, understand that, by consolidating your loans, you will start your forgiveness clock over. For example, if you were already on an income-driven repayment plan and consolidate your loans, then you will lose the any credit you had already earned toward forgiveness.
Lastly, understand that some of the loans that we called out for consolidation are those from another federal student loan program called the Federal Perkins Loan Program. Those loans have their own cancellation benefits that are based on your job. If you consolidate these types of loans, you will lose access to those cancellation benefits. Learn more about Perkins Loan cancellation.