Federal student loan consolidation combines multiple federal student loans into a single Direct Consolidation Loan with one monthly payment and one loan servicer. The new interest rate is the weighted average of the consolidated loans, rounded up to the nearest one-eighth of a percent.
10 steps across 1 sections
1. Steps Process
- Determine if consolidation is right for you. Consolidation makes sense if:
- You have multiple loans with different servicers and want one payment
- You have FFEL or Perkins Loans that need to be converted to Direct Loans for PSLF eligibility
- You want access to IDR plans not available for your current loan type
- You are in default and want to regain eligibility for federal benefits
- Review your current loans. Log into studentaid.gov to see:
- All outstanding federal student loans
- Current interest rates for each loan
- Loan servicer(s)
- Outstanding balances
Common Mistakes
- Consolidating when pursuing PSLF
- Expecting a lower interest rate
- Not realizing interest capitalizes
- Consolidating subsidized loans with unsubsidized
- Including Parent PLUS Loans with student loans
Pro Tips
- Use consolidation to access PSLF
- Consolidation can cure default
- There is no application fee
- Consider the repayment term extension carefully
- Do not consolidate if you are close to forgiveness