Loan consolidation allows you to refinance any or all eligible outstanding federal student loans and create a single new loan with one monthly payment. The new loan will have a fixed interest rate, new terms, and may have an extended repayment period of up to 30 years.
Both the Federal Family Education Loan Program (FFELP) and the Direct Loan Program offer loan consolidation. FFELP loan Consolidation is available from participating lenders, and Direct consolidation loans are available from the federal government. Alternative consolidation options are also available through private lenders. However, benefits, repayment options and application procedures vary.
Loan consolidation is not for everyone. Before choosing loan consolidation, be sure to review all your options.
Who is eligible for loan consolidation?
To be eligible for loan consolidation, you must agree to the terms and conditions listed on the Application and Promissory Note, which include:
- You are not enrolled in school, or you are enrolled on a less than half-time basis.
- You are in the "grace period" or already in repayment on EACH loan you have chosen to consolidate.
- If you are in default, you must either make satisfactory repayment arrangements with your current lender or agree to repay the consolidating lender under an income-sensitive repayment plan.
- You must agree to notify the lender of any address changes.
Your alternatives depend on what you plan to accomplish by consolidating
- Need a lower monthly payment? If a lower monthly payment is your goal, your current lender/loan holder may already offer an alternative option.
- Temporarily struggling to keep up with your loan payments? If meeting your monthly payment is difficult, consider deferment or forbearance options that allow eligible borrowers to temporarily postpone or reduce monthly payment.
- Juggling too many payments with one lender? If one lower monthly payment is your intention, ask about “serialization”, the combining of all loans held by one lender. It allows your lender to create one monthly payment that is proportionally applied across all of the underlying loans. Multiple loans with one lender are often "serialized" automatically.
Advantages and Considerations of Student Loan Consolidation
This chart lists the features of loan consolidation, along with some considerations to help you decide if consolidation is the right option for you.
|One lender holds the loan.||
|A fixed interest rate.||
|Separate federal student loans are combined into one loan.||
|No fees, credit check or prepayment penalties.||
|An extended repayment period from 10 to 30 years, depending on your total debt.||
|Four repayment plan options: standard, graduated, income-sensitive or extended.||
If you need information on your loans, you can access the National Student Loan Data System, the U.S. Department of Education's central database for all federal student aid records (private loans are not listed).
- Visit National Student Loan Data System for Students - your U.S. Department of Education PIN will be required
(the same one used in the online FAFSA).
- You'll see a listing of your federal student loans with the amounts, dates of origination and outstanding balances.