A consolidation loan may help make payments more manageable by combining several federal student loans into one loan with one monthly payment. You would need to apply for loan consolidation and choose one of the following repayment plans: standard, extended, graduated, income-contingent (for Direct Consolidation Loans), income-sensitive (for FFEL Consolidation Loans), or income-based. Depending on the amount of debt, standard and graduated repayment plans have 10- to 30-year repayment periods.
The interest rate for both Direct and FFEL Consolidation Loans is a fixed rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on all of the loans that are consolidated, rounded up to the nearest one-eighth of 1 percent.
How can consolidation help you manage your debt?
Loan consolidation can offer benefits to help manage education debt. You can:
- Make lower monthly payments by increasing the repayment period (However, this will increase the total amount you repay over the life of the loan).
- Make a single monthly loan payment on one bill to one lender.
As with other federal student loans, you may prepay a consolidation loan without penalty and change repayment plans if you find that the current plan no longer meets your needs.
Is there a downside to consolidation?
Although consolidation can help many students manage their monthly payments, there are some cases when consolidation may not be right for you.
- You may lose certain benefits (such as cancellation benefits, interest subsidies, etc.) that were offered on the original loans. Borrower benefit programs may vary among different consolidation lenders.
- If you are close to paying off the student loans, it may not make sense to consolidate. By extending the years of repayment for the loans, you may be increasing the total amount you will have to pay in interest.
| Pros | Cons |
|---|---|
| Lower monthly payments: Consolidation may reduce the monthly payments by as much as 50% or more. | Longer repayment schedule: Consolidation may extend how long you have to pay off student loans, sometimes up to 30 years. |
| Fixed interest rate: Your monthly payment is always the same. | More interest to pay: You may pay more interest since you’ll be making payments for a longer period of time. Plus, the new interest rate is based on the weighted average of the underlying loans, rounded to the nearest higher 1/8th of one percent. |
| One bill, one payment: Managing one loan with one monthly payment is more convenient than managing multiple loans. | Loss of loan incentives: When you combine multiple loans into one, you may lose any incentive programs on the original individual loans. |
Do your homework. If you can manage a smaller payment or if you’re experiencing a financial hardship, you may want to consider changing your repayment plan before considering consolidation.
Loan consolidation provides access to additional options but may result in the loss of certain benefits; therefore, we encourage you to visit studentaid.gov/manage-loans/consolidation to learn about the pros and cons of consolidating your loans.
Helpful Tips
- Not all loans qualify for loan consolidation, so check to see if this is an option.
- Once you consolidate, you can re-consolidate only if you have an eligible student loan that was not included in the original consolidation.
WHAT IS NEEDED TO COMPLETE THE CONSOLIDATION APPLICATION?
Information about the current loan(s) should be gathered before beginning the online combined application and promissory note. You will want to have all loan records, account statements, and bills on hand so that you have on hand all the information needed to complete the application and promissory note, and any related forms. To find the information you need to answer questions concerning the loan you want to consolidate, you can use the following resources:
- your last monthly billing statement(s)
- your quarterly interest statement(s) or annual statement(s)
- your coupon book(s)
- the Internet site of the loan holder(s) or servicer(s)
- the school’s financial aid office, if you are currently in school
- Important Note: In the Loan Information (Education Loan Indebtedness) sections of the Consolidation application, you will be asked about the education loans. Ensure that you list all your education loans, indicating those you want to consolidate (including Direct Loans) and those you do not want to consolidate. Education loans that are not included in the consolidation may be considered in determining a borrower’s maximum repayment period under the Standard and Graduated Repayment Plans.
FEDERAL STUDENT AID ID
If you do not already have one, apply for an FSA ID from the U.S. Department of Education Federal Student Aid website. The FSA ID will be required to e-sign and submit the application online, which is the most efficient method for submission.
CONSOLIDATION INFORMATION
Before you complete the online combined application and promissory note and select a repayment plan, you can estimate what your monthly payments would be under each of the four available repayment plans using the online calculator on the U.S. Department of Education’s Loan Consolidation web page. After you have read the overview of repayment plan options, be sure to also read through the Consolidation Package (including cover letter, forms, instructions) before you complete the online combined application and promissory note.
HOW TO APPLY
Skip the paperwork and have your request processed faster by completing it online at StudentAid.gov. This is the quickest and easiest way to submit your request. You will need your FSA ID, personal information, and spousal information (if applicable).
If you are unable to complete the online request, you can get a copy of the paper request form at StudentAid.gov/Forms-Library.
Before you complete your application, you can estimate what your monthly payments will be under each of the available repayment plans using the Loan Simulator on StudentAid.gov.