Consolidating Your Loans
A Direct Consolidation Loan allows you to combine one or more federal education loans into a single loan. There could be benefits to consolidating; however, it's not right for everyone. We highly recommend knowing all of the facts before making a decision to consolidate your loans!
Potential Advantages to Consolidation
It is important to weigh the pros and cons of consolidation before you submit an application to consolidate. Here are some of the potential advantages to consolidation:
- One servicer, one bill, one payment
- Managing your federal education loan debt with one servicer and one monthly payment may be more convenient than with multiple servicers.
- The option to choose your servicer!
- When completing an electronic application, you will be given the opportunity to select the federal loan servicer you would like to help manage your Direct Consolidation Loan.
- Potential for lower monthly payments by extending the time you have to repay your loan
- Fixed interest rate
- If you have variable rate loans, consolidation will switch your variable rate into a fixed rate.
- Consolidation may make loans eligible for the following repayment and forgiveness programs, which are only available for Federal Direct Loans:
- Pay As You Earn (PAYE) for student borrowers
- Revised Pay As You Earn (REPAYE) for student borrowers
- Income-Contingent Repayment (ICR) for student or parent borrowers
- PSLF
Potential Disadvantages to Consolidation
Consolidation isn't right for every situation, and in some situations, it may be unnecessary. Before you submit an application, it is important to understand why you would like to consolidate and the potential drawbacks of consolidation:
- Longer repayment term
- If consolidating extends your repayment term, you will pay more interest over a longer period of time.
- Outstanding interest will capitalize (add to your principal balance) at the time your loan is consolidated
- If interest is capitalized, your total outstanding loan balance will increase, which means more interest will accrue on your loans each day.
- Weighted average interest rate for the Direct Consolidation Loan is rounded up to the nearest one-eighth of one percent
- Potential loss of loan incentive program benefits
- Potential loss of Servicemembers Civil Relief Act (SCRA) benefit eligibility
- In order to qualify for the SCRA interest rate benefit, your loan must have been disbursed prior to the start date of your active duty service.
- Loss of qualifying PSLF payments
- If you include a Direct Loan in the consolidation, you will lose credit for any of the required 120 PSLF qualifying payments made on that loan prior to the loan being consolidated.
- Loss of qualifying Income-Driven Repayment (IDR) plan payments
- If you include a Direct Loan in the consolidation, you will lose credit for any of the qualifying payments made under an IDR plan on that loan prior to the loan being consolidated.
Additional Considerations
Private Education Loans
You are not able to include private education loans in a Direct Consolidation Loan. However, those balances may be included in the debt not to be consolidated. Adding those balances may extend the repayment term on your Direct Consolidation Loan, as long as the total amount of the loans not being consolidated doesn't exceed the total amount that is being consolidated.
PLUS Loans
As a student, you are not able to consolidate parent PLUS loans that are in your parent's name with your own federal student loans.
As a parent, you are able to consolidate parent PLUS loans that you obtained on behalf of a dependent student with federal student loans that you took out for your own schooling. However, you are not able to consolidate parent PLUS loans that you obtained on behalf of a dependent student with federal student loans that the student obtained in his or her own name.
Consolidation Timeline
It typically takes 30 business days (4-6 weeks) to originate a Direct Consolidation Loan from the date your application is received.
If you selected us (FedLoan Servicing) to service your Direct Consolidation Loan, you can view the progress of your application anytime through . Additionally, the following timeline illustrates what you can expect during the process of originating a Direct Consolidation Loan:
- Application is received by servicer (1 Day)
- Confirmation from your current servicer/loan holder of the pay-off amounts and interest rates on your underlying loans (generally within 2 weeks of receiving your application)
- Loan Summary Statement is sent for your review
- You have 10 business days from the date on your Loan Summary Statement to request any changes or cancel your consolidation request
- Once the 10 business day period is over, no further adjustments can be made to the consolidation application/promissory note – the loan will be pending disbursement for 3 days
- The loan is disbursed!
- A welcome letter for your new Direct Consolidation Loan will be sent, and your first payment will be due within 60 days.
NOTE: If your application is incomplete, we will communicate with you regarding what is required to complete your Direct Consolidation Loan application. In some cases, you will be able to provide the necessary information within 180 days. In other cases, a new application may be required.
Once the Consolidation Loan has been disbursed:
- If any financial adjustments are required based on a balance update from your previous servicer or loan holder (such as an underpayment or an overpayment) those updates are generally completed within 30-45 days from the date your Direct Consolidation Loan is disbursed.
- If you believe there is still an outstanding balance on a loan that was included in your consolidation more than 45 days from the date your Direct Consolidation Loan was disbursed, please contact us.
- If you forgot to include any loans in your Direct Consolidation Loan, you only have 180 days from the original disbursement date to request to add additional loans (PDF).
- If it has been more than 180 days from the date your Direct Consolidation Loan was disbursed, you will need to complete a new Direct Consolidation Loan Application and Promissory Note to request a new loan.