What Is Student Loan Consolidation?

student loan consolidation

Consolidating federal student loans is an important decision, and one in which you should weigh the pros and cons to decide whether a direct consolidation loan is right for you.

A Direct Consolidation Loan allows you to consolidate, or combine, multiple federal student loans into one student loan. As a result, you will have a single monthly payment instead of multiple payments.

The direct consolidation loan program is managed by the U.S. Department of Education. You can learn more about direct consolidation loan by visiting the U.S. Department of Education website. You can also contact the Loan Consolidation Information Call Center at 1-800-557-7392.

In direct loan consolidation, you have one loan, one interest rate, and one loan servicer. The resulting interest rate is a weighted average of the interest rates on your existing loans, and is a fixed interest rate. You can consolidate your federal loans after you graduate, leave school, or attend school less than half-time enrollment.

We frequently get asked several questions that relate to direct consolidation loans. We have synthesized below the most popular questions:

Why Should I Consolidate My Student Loans?

There are several pros and cons to direct consolidation loans. Let’s take a look.

Pros of Student Loan Consolidation

  • If you want to combine multiple federal student loans into one single student loan payment, then student loan consolidation may be the right decision
  • You may gain access to certain types of student loan repayment plans, particularly student loan repayment plans such as deferment or forbearance that allow you to limit or postpone your loan payments in the short-term due to economic hardship or loss of employment
  • You also may be able to lock in a fixed interest rate loan, for example, if you currently have a variable interest rate loan and do not want to be beholden to swings in interest rates

Cons of Student Loan Consolidation

  • While student loan consolidation may enable you to repay your student loans in 10 to 30 years with various student loan repayment plan options, you will end up making more monthly payments and accruing more interest
  • You have certain borrower benefits that exist with your current student loans. Some of these benefits may include interest rate discounts or student loan cancellation, for example. If you consolidate student loans, you may lose some of these borrower protections, which can make the cost of repaying your student loan higher.
  • Once you consolidate student loans, your old loans are paid off so you cannot go back and reap prior benefits or features

What Types of Student Loans Can I Consolidate?

Consolidation applies to federal student loans, rather than private student loans. So if you have both federal and private student loans, then you can only consolidate your federal student loans. Your other option is student loan refinancing, which allows you to combine both your federal and student loans into a single student loan, single (lower) interest rate, and single student loan servicer.

Per the U.S. Department of Education, the types of federal student loans that can be consolidated include:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Supplemental Loans for Students (SLS)
  • Federal Perkins Loans
  • Federal Nursing Loans
  • Health Education Assistance Loans

What Are The Requirements of Student Loan Consolidation?
You must have at least one Direct Loan or FFEL program student loan that is in a grace period or student loan repayment.

Can I Consolidate A Defaulted Student Loan?
Yes, you can consolidate a defaulted student loan. However, you first have to work with your current student loan servicer to agree on proper student loan repayment. Alternatively, you can select a student loan repayment plan for your direct consolidation loan such as Income Based Repayment Plan, Pay As You Earn Repayment Plan, Income-Contingent Repayment Plan.

Are There Prepayment Penalties For Direct Consolidation Loans?
No, you can repay your direct consolidation student loan at any time with no prepayment penalties.

Is There An Origination Fee For Direct Consolidation Loans?
There are no fees to consolidate your federal student loans.

Can Parents Consolidate Parent PLUS Loans?
Yes. However, parent loans and student loans cannot be consolidated together. The parent and the student would have to consolidate their loans separately. While students can only consolidate federal student loans during the grace period or when student loans have entered repayment, parents can consolidate Parent PLUS Loans at any time.

When Does Repayment On A Consolidation Student Loan Begin?
Repayment on a direct consolidation student loan begins within 60 days of the student loan disbursement, unless you qualify for some form of student loan repayment plan such as student loan deferment or student loan forbearance.

The Bottom Line
Student loan consolidation can be a great way to combine all your federal student loans into a single student loan with a single interest rate and single loan servicer. However, be careful when you sign up for a student loan income repayment plan.

While a student loan income repayment plan can lower your monthly payments and help improve short-term cash flow, it will hurt long-term in the form of increased interest payments. Also, be sure to understand fully which borrower protections and benefits you may lose with student loan consolidation relative to your existing student loans.


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Doc Benjamins is not a lender and does not make loans. We are a free, independent and unbiased website that helps empower borrowers so they can make more informed financial decisions. The rates, terms and other student loan information provided on this website do not legally bind Doc Benjamins or the lenders referenced herein. The rates, terms and other student loan information are estimates and may change periodically and/or differ from your final rate and terms, which may be based on your individual credit profile and other factors as determined solely by the lender. If you would like to apply for a loan, please visit the website(s) of each lender and carefully review their rates, terms and conditions for further information.