How does Consolidation work?
Direct Loan Consolidation Process
Consolidation allows you to bring together or combine multiple Federal Direct Loans into a single Loan. The result of consolidation is a single monthly payment instead of multiple payments for the loans. Consolidation can also give you access to additional loan repayment plans. The current consolidation loan interest rate is 4.25% and it is a fixed interest rate.
IMPORTANT: Never pay another company to help you consolidate your loans. These companies are not affiliated with the U.S. Department of Education or their Loan Servicers. The application process is FREE and EASY. For more information, please visit: https://studentaid.gov/app/launchConsolidation.action.
- Several federal student loans with different servicers? Consolidation can simplify loan repayment by giving you a single loan with just one monthly billing statement.
- Consolidation can lower your monthly payment by giving you a longer time (up to 30 years) to repay your loans.
- You will be able to switch any variable-rate loans you have to a fixed interest rate.
- You may include your Perkins Loan or HRSA Loans, but once consolidated, you are no longer eligible for the cancellation options listed on your Perkins promissory note. Additionally, under consolidation, interest will accrue like an unsubsidized loan.
- Consolidation usually increases the time you have to repay your loans; you will probably pay more interest than if you did not consolidate.
- When you consolidate your loans, any outstanding interest on the loans that you consolidate becomes part of the original principal balance on your consolidation loan. This change in your principle balance results in interest accruing on a higher principal balance on your consolidated loan than your original Direct Loan.
- Consolidation may also cause you to lose certain borrower benefits—such as interest rate discounts, principal rebates, or some loan cancellation benefits—that are associated with your current loans.