Consolidate Your Loans

If you have several federal education loans, you may want to consider combining them into one new loan with one monthly payment. This is called loan consolidation and can help keep you organized and on track with repayment.

Like many federal loan borrowers, you may have both FFEL and Direct Loans. The U.S. Department of Education (ED) encourages borrowers with both types of loans to consolidate them into the Direct Loan program. Once these loans are consolidated, you will have repayment options, some which lower your monthly payments, from which to choose.

Is consolidating your loans right for you? Consider the advantages and disadvantages carefully before you act. Once you consolidate, you are locked into a loan with a fixed interest rate. If you just want to reduce your monthly payment, discuss the federal loan repayment options available with your loan serviser.

Eligible student loans.

Federal Loan Consolidation


If consolidating variable interest rate loans, you save money if you consolidate while variable interest rates are low.

Variable interest rates change annually. Therefore, if you consolidate your variable interest rate loans and the interest rates drop the following year, you have "locked" into the higher interest rate for the life of the loan.


Single Payment
If you have loans with multiple servicers, you send a monthly payment to each. However, if you consolidate all those loans, you make a single payment to one loan servicer.

Lower Monthly Payment
Consolidation loan monthly payments are lower because the repayment period is longer.

Loss of Deferment and Forgiveness Benefits
You may not be eligible to receive the same deferments on your Consolidation Loan that you were eligible to receive on your original loans. Also, you might lose eligibility for certain cancellation or forgiveness programs, especially if you are including Perkins Loans in the Consolidation. (In either case, check with your loan servicer.)

More Interest Paid
With a longer repayment period, you'll pay more interest over the life of the loan.

What Else?

Manage Monthly Budget
Savings from reduced monthly payments allows you to pay other monthly bills with higher interest rates, such as credit cards.

Remove Loans From Default Status
After making satisfactory repayment arrangements with the holder of your loans in default, you can consolidate those loans and reinstate benefits (deferments, eligibility to apply for financial aid, etc.) that were lost when your loans were placed in default.

No Extra Costs
There are no application or processing fees and there are no prepayment penalties.

Loss of Payment Incentives
You may forfeit any payment incentives/discounts you are currently receiving. (Check with your loan servicer.)

Visit the Federal Student Loan Consolidation Webpage for more information.

Private Loans

There are a growing number of companies offering student loan refinance and consolidation products. You should know the interest rate, fees and terms before you agree to consolidate or refinance your loans. While you are not allowed to consolidate private loans into a federal consolidation loan, avoid the temptation to consolidate your federal loans into a private consolidation loan; you may lose some valuable benefits available in federal student loan programs. Review information about private student loans.


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