Direct Consolidation Loans

Direct Consolidation Loans

Consolidation can assist you with managing your student loan debt. It allows you to combine multiple student loans together, resulting in one loan payment and one loan with the William D. Ford Federal Direct Loan Program.

You don't have to consolidate all of your loans. You can choose which ones you want to include and which ones you don't. For example, many students choose not to include their Perkins Loans in order to maintain the forgiveness options on those loans.

  • Federal Perkins Loans
  • Direct Subsidized or Unsubsidized Loans
  • Federal Stafford Loans (subsidized and unsubsidized)
  • Direct PLUS Loans
  • Federal PLUS Loans (for parents and for graduate and professional students)
  • Federal Supplemental Loans for Students (SLS)
  • Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)
  • Health Education Assistance Loans (HEAL)
  • Federal Insured Student Loans (FISL)
  • Federal Nursing Loans (NSL)
  • Direct Consolidation Loans (if you have at least one other eligible loan to consolidate with it)
  • Federal Consolidation Loans (if you have at least one other eligible loan to consolidate with it)
  • The interest rate on your Consolidation Loan is a fixed rate for the life of the loan. Your rate will be the weighted average of the loans you are consolidating, rounded up to the nearest 1/8th of one whole percent.
  • The consolidation rate may result in a slightly higher rate, since it's rounded up to the nearest 1/8th of one percent. On the other hand, if the loans you consolidate have a variable rate that is set to increase, you can lock in a lower, fixed rate.
  • Your loan holder may offer a reduction in the interest rate if you make on-time, electronic payments (direct debit). It's always a good idea to ask your loan holder about these and any other discounts.
  • No interest accrues on loans made on or after October 1, 2008 (or on the portion of a Direct Consolidation Loan used to repay such a loan) for military borrowers serving in an area of hostilities.

Note: Even though after consolidation you will have one loan, if you are consolidating subsidized and unsubsidized loans, they will be tracked separately. If you decide to return to school or enter into another deferment period, the subsidized portion of your consolidation loan retains the benefit of having the interest paid for you during that time. The only exception to this rule is a Federal Perkins Loans. If you consolidate Perkins Loans, they are included in the unsubsidized portion of the Consolidation Loan and do not retain their interest benefits.

Consolidation extends your repayment period from the standard 10 years up to 30 years, depending on the total amount of your educational loan debt.

Maximum Repayment
$7,500 - 9,99912 years
$10,000 - 19,99915 years
$20,000 - 39,99920 years
$40,000 - 59,99925 years
$60,000 and higher30 years

While increasing the repayment period reduces monthly payments, it increases the amount of interest you will pay. You will pay more interest over the life of the loan, unless you increase your payments or prepay the loan (which you can do without penalty) once your financial situation improves.

Use the consolidation calculator to estimate your monthly payments, principal, and interest, and compare this to your existing loan payments.

When you begin repayment, your loan holder offers several flexible payment options:

  • Standard (equal) repayment is the traditional approach. You will pay less interest under this plan.
  • Graduated repayment begins with lower payment amounts that increase over time. This allows payments to be smaller in the beginning of repayment with increases in stages during the repayment period.
  • Income-contingent repayment (Direct Consolidation Loans) adjusts your payments annually based on your gross income and family size.
  • Income-sensitive repayment (Federal Consolidation Loans) adjusts your payments annually based on your gross income.
  • Income-based repayment limits your loan payments to 15 percent of your (and your spouse's, if applicable) income that exceeds 150 percent of the poverty line for your family size.
    • Income-based repayment is not available for Consolidation Loans that paid off one or more Direct PLUS Loans or Federal PLUS Loans for parents.
    • If the monthly payment amount is not enough to pay accrued interest on the subsidized portion of a Consolidation Loan, the Department of Education will pay the remaining interest for a period of three years.
    • Estimate payments with the income-based repayment calculator.
  • Extended repayment offers a lower payment by stretching out the life of the loan. If your first loan was disbursed on or after October 7, 1998 and you have more than $30,000 in outstanding Federal Family Education Loan (FFEL) Program loans or Direct Loans (a combined total from both programs does not qualify), your repayment term may be extended up to 25 years. Note: If you meet these qualifications, you can have your repayment period extended for up to 25 years without consolidating your loans. Check with your loan holder about the pros and cons of this option.

You have the following loans you're considering consolidating:

Loan A: $2,625 balance, 4.13 percent interest
Loan B: $3,500 balance, 5.2 percent interest
Loan C: $5,500 balance, 6.1 percent interest
Loan D: $5,500 balance, 6.8 percent interest

If you consolidate these loans (a total of $17,125), you'll have 15 years (180 months) to repay your Consolidation Loan. The weighted average interest rate of the loans is 5.839 percent. This is rounded up to the nearest 1/8th of one whole percent, resulting in your fixed interest rate of 5.875 percent.

If you repay your Consolidation Loan under an equal payment plan, your monthly payment will be $143.36. In the end, you will have paid $25,804.18, which includes $8,679.18 in interest.

  • Check to see if your loan holder offers automatic payment withdrawal. This is an easy way to make sure your payments are made on time. Some loan holders even lower your interest rate if you sign up for this option.
  • You may prepay all or part of your loan at any time without penalty. Prepayment can substantially reduce the amount of interest you will pay.

Use our loan consolidation calculator to estimate your monthly payments, principal, and interest if you consolidate.

Consolidation has both benefits (pros) and drawbacks (cons):


  • Allows you to combine multiple student loans together so you only have one loan payment and loan holder
  • Can lock in a lower, fixed interest rate if the variable rates on the loans you wish to consolidate are due to increase
  • Can extend your repayment period from the standard ten years, lowering your monthly payment


  • Can result in a higher interest rate
  • Can increase your total cost of debt (you pay more interest)
  • Might lose eligibility for certain types of deferment
  • Might lose eligibility for certain cancellation or forgiveness programs. This is especially true if you consolidate Perkins Loans, at which time you lose your eligibility for the following loan forgiveness provisions:
    • Education Component of Head Start Program Staff Member
    • Law Enforcement or Corrections Officer
    • Nurse or Medical Technician
    • Professional Provider of Early Intervention Services for the Disabled
    • Public or Non-Profit Child or Family Services Agency Employee
    • Vista or Peace Corps Volunteer

Be sure consolidation is right for you! If you're not certain, talk with the holder of the loans you wish to consolidate.

To apply for a Direct Consolidation Loan, your loans must be in a grace period or in repayment.

Grace period: Some student loans include a grace period of six or nine months before you are required to begin repaying them. This grace period begins the day after you stop attending school at least half time. For some loan types, the government pays the interest on your behalf during the grace period. Since your grace period ends once a consolidation is complete, you could be waiving (giving up) part of your grace period by consolidating during that time. This waiver is permanent-- you can't reverse it.

  • If you have variable interest rate loans, you may be able to obtain a slightly lower interest rate on your consolidation loan if you apply for the consolidation during your grace period. Be sure to check with the Direct Loan Program to see if you qualify for this benefit.
  • If you consolidate during the grace period, you may be able to delay the processing of the consolidation loan until shortly before the end of the grace period, giving you more time to benefit from the grace period when you are not required to begin payment.

You also can consolidate if your loans are in a deferment or default status, but some rules might apply.

  • Deferment: A deferment is a period of time during which your loan holder temporarily suspends your regular payments. If the loans you are consolidating are in an authorized deferment period, the deferment ends the day the consolidation is complete. If you are still unable to make payments at that time, you must reapply for a deferment after you consolidate. In some cases, you may not be eligible for the same types of deferment as you were before consolidation.
  • Default: If the loans you want to consolidate are in default, you must make special arrangements before the loans are eligible for consolidation:
    • Establish a satisfactory repayment arrangement with the loan holder.
    • The William D. Ford Direct Loan Program will set the number of monthly payments you'll be required to make before you can consolidate. The payments must be consecutive, voluntary, on time, and reasonable-and-affordable. A lump sum payment, tax offset, wage garnishment, or court-ordered payment will not count towards the required consecutive monthly payments.

Apply through the website.

It is critical that you continue making payments, if required, to the holders or servicers of the loans you want to consolidate until your consolidation servicer informs you that the underlying loans have been paid off.

Your loan holder understands that you may experience financial difficulty and offers options that may temporarily reduce or suspend your monthly Consolidation Loan payments. If you are having trouble making payments, contact your loan holder immediately to request assistance, such as a deferment or forbearance.

Deferment: A period of time during which your loan holder temporarily suspends your regular payments

Forbearance: A period of time during which your loan holder temporarily reduces or suspends your regular payments

Interest during deferments and forbearance
  • You are responsible for paying the interest that accrues on the unsubsidized portion of your Consolidation Loans during deferment and forbearance periods.
  • You may pay the interest as it accrues or allow it to capitalize. Capitalized interest is added to the principal balance and can result in a higher monthly payment.
  • Organize all your loan records. This way, if you need to contact your loan holder, you'll have the facts about your loan handy.
  • If you request a deferment or forbearance, continue making your payments until you receive written notification from your loan holder that the deferment or forbearance is approved.

Under certain circumstances, your Consolidation Loan, or a portion of that loan, may be cancelled, forgiven, or discharged. In other words, you won't have to repay it.

Below is a summary of some of the cancellation provisions that loan holders, guarantors, and the U.S. Department of Education administer. Contact your loan holder for more information:

  • Death: If you die, your loan obligation will be cancelled.
  • Total and permanent disability: Your loan may be cancelled if you become totally and permanently disabled.
  • Teacher forgiveness: A loan forgiveness program for teachers serving in designated low-income schools exists for new Direct Subsidized or Unsubsidized / Federal Stafford Loan borrowers after October 1, 1998.
  • Miscellaneous: A portion of your loan may be cancelled in other instances including school closure, false certification, identify theft, failure of the school to pay a refund, or employment in a public service job (public service for Direct Consolidation Loans only).

Read more about cancellation provisions.

Bankruptcy information

Generally, federal student loans, including Consolidation Loans, are not cancelled or discharged in bankruptcy proceedings.

Notify your loan holder immediately if you anticipate difficulty making a payment. Failure to pay all or part of a payment when due can result in late charges. Your loan holder also has the option, in some cases, to file a lawsuit against you for failure to make timely payments.

If you fail to make payments for 270 days, your loan is considered to be in default. Defaulting on your student loan can result in the serious consequences.

There are three basic guidelines to follow to avoid delinquency and default:

  • Inform your loan holder of changes in your name, mailing address, telephone, or Social Security number so that all correspondence is promptly directed to you.
  • Read and keep all documents you receive pertaining to your loan and be sure to understand your loan amount and the payments that will be required.
  • If you're experiencing financial hardship and are unable to make your payments, call your loan holder for information regarding possible temporary postponement or reduction of payments through an alternative repayment plan, deferment, or forbearance.