Student and Parent Loans
Federal Loan Consolidation

Whether or not you should consolidate depends on your future educational and employment plans, as well as under what provisions your current loans are subject. For in-depth information, see  However, you may first want to review the outlined advantages and disadvantages of consolidation presented below.

Federal Loan Consolidation Overview
  • Federal Loan Consolidation involves taking out a new Consolidation Loan to pay off existing federal loans (i.e., Federal Direct, Federal Direct Grad PLUS, Perkins, Health Professions, Nursing Student). You may consolidate either all, or some of, your federal loans.

  • The interest rate on a Federal Consolidation Loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.


Advantages of Federal Loan Consolidation
  • Receive a single monthly bill for all loans you consolidate.

  • Lock in a fixed interest rate for your entire repayment period.
    You can lock it in for your entire repayment period if you consolidate after July 1, when the new variable rates are changed.  For more information on interest rates, click here.

  • Reduce your monthly payment
    Depending on the amount you consolidate, extend your repayment period up to 30 years, and lower your monthly payment.

    Note: You may not need to consolidate to reduce your monthly payment:

    • Federal Direct and Federal Direct Grad PLUS Loans already provide for extended or graduated payment options. Check with your lender for further details on these options.

    • If you qualify for income-based repayment (IBR) your monthly payments will be capped. To read about IBR, click here.

  • Have your loans forgiven under the new Public Service Forgiveness Provisions
    The new Public Service Forgiveness provisions apply only to Federal Direct Loans (not to FFELP Loans, such as Federal Direct, Federal Direct Grad PLUS, etc.). Therefore, if you think you may be eligible for Public Service Forgiveness, you MUST consolidate your existing loans into a Federal Direct Consolidation Loan after July 1 to be eligible. To read about Public Service Forgiveness Provisions, click here.
Disadvantages of Loan Consolidation
  • You will lose any benefits, such as cancellation benefits on your underlying loans
    You will lose any benefits, such as cancellation benefits on your underlying loans. It is especially important to review the cancellation provisions of Perkins Loans, and Federal Direct Loans where applicable, before determining whether to consolidate them. If you think there’s a good chance you would qualify for any of the provisions, you should not consolidate. Review general information about cancellation provisions at:, and Perkins Loan cancellation at

  • You will lose any lender-specific borrower benefits on your underlying Federal Direct or Federal Direct Grad PLUS Loans
    Some lenders offer loan benefits, either principal reductions or interest rate reductions, which may reduce the overall amount of your repayment.  When you consolidate you pay off the original loan and any benefits associated with that loan are lost.

  • You will lose your grace periods on your loans.
    At consolidation, you will lose your grace period and enter repayment immediately. Therefore, if you decide to consolidate, wait until the latter part of your grace period to do so. However, you should allow 8-10 weeks for processing.

    A grace period is a short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period may also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. Depending on the type of loan, you will have a grace period of six months (Federal Direct Loans) or nine months (Perkins Loans) before you must start making payments on your student loans. The Federal Direct PLUS Loans do not have a grace period.

How to Consolidate
Most lenders are no longer offering consolidation loans. You can still consolidate your federal loans with the U.S. Department of Education's Federal Direct Loan Consolidation Program.

To obtain a federal direct consolidation loan, call the US Department of Education at 1-800-557-7392 (TDD 1-800-557-7395) or visit 

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