Frequently Asked Questions


Loan Consolidation

What is consolidation?

Loan Consolidation allows you to refinance any or all of your outstanding federal student loans and create a single new loan with one monthly payment. The new loan will have a fixed interest rate , new terms, and may have an extended repayment period of up to 30 years. Any repayment benefits that existed on the underpaying loans will no longer exist for the consolidation loan.

What are the advantages of consolidation?

  • Reduce monthly payments with extended repayment period – consolidation can reduce your monthly payment by up to 43%.
  • Lock in a fixed interest rate – borrowers who have existing variable rate FFELP loans can consolidate and lock in a fixed interest rate for the life of the loan. If interest rates were to increase, the fixed rate of the consolidation loan would not increase.
  • Make one payment to one lender/servicer each month.
  • Manage debt easier – with a fixed interest rate and paying only one lender a month, budgeting becomes much easier.
  • Improve credit score – consolidating student loans can help increase a borrower's credit score by reducing the number of open accounts on the credit report.
  • Consolidation incentives – lenders may offer borrowers interest rate reduction incentives for consolidating their loans and/or additional interest rate reduction for auto-debit or making a certain number of on time payments. It is important to weigh gained consolidation benefits against lost Stafford or PLUS benefits.

What are the disadvantages of consolidation?

  • Prolongs the life of the loan – without consolidation, borrowers have a maximum repayment term of 10 years. Consolidation can increase the repayment term up to 30 years.
  • Forfeiting of the original repayment incentives – many loans are originated with money saving incentives, which are forfeited upon consolidation. It is not uncommon for the repayment benefits offered on the consolidation loans not to be as attractive as the incentives offered on the original loans. Your lender will be able to help you to compare the savings potential of the original incentives versus consolidation incentives.
  • Pay more interest over longer repayment period.
  • Loss of loan forgiveness eligibility – a borrower who consolidates a Perkins loan loses eligibility for the Teacher Loan Forgiveness program on that loan.
  • Loss of deferment options – if borrowers think they may need to apply for a military deferment in the future, consolidation may not be in their best interest. If a borrower has loans disbursed on/after July 1, 2001 and consolidates them with loans disbursed prior to July 1, 2001, the consolidation loan will not be eligible for the military deferment.

What loans can be consolidated?

Following loans are eligible for consolidation: Direct Loans (Subsidized, Unsubsidized and PLUS), Federal Family Education Loan Program/ FFELP Loans (Stafford, Unsubsidized Stafford and PLUS), SLS, HEAL and Perkins. We recommend that you leave Perkins loans out of your consolidation, not to lose your forgiveness options for this program.

Who can consolidate?

To be eligible for loan consolidation you:

  • Can consolidate any of the following loans: Stafford , Parent PLUS, Grad PLUS, SLS (Supplemental Loans for Students), HEAL and Perkins.
  • Must be in the grace period or already in repayment on each loan you choose to consolidate.
  • Cannot be in default or, if defaulted, must have met specific repayment requirements as set by the lender.
  • Parents may consolidate their PLUS loans and any of their own Stafford loans. However, parents cannot consolidate their children's Stafford loans and students cannot consolidate their parents' PLUS loans into a single consolidation.

Will I loose my grace period if I consolidate?

Since subsidized loans do not accrue interest while in grace, it is important to maximize your interest savings by not consolidating too early. Some lenders/servicers will allow borrowers to keep their grace period even if the application is submitted during the first six months after graduation. Borrowers may request to “hold” the application through the end of their grace period. Once the consolidation is processed and the loan disburses, the grace period is forfeited and payments will begin.

Are there any alternatives to consolidation?

Before you decide to consolidate, consider the available alternatives:

  • If you need a lower monthly payment, research different repayment options offered by the Department of Education. You can find this information under "Managing Repayment" at
  • If you are temporarily struggling to keep up with your loan payments, consider a deferment or forbearance that allows you to postpone or reduce your monthly payment.

What is better; Extended Repayment or Consolidation?

One repayment option that students may overlook is extending the repayment period without consolidating the loan. For balances greater than $30,000, this is a viable option. Extended repayment will allow you to lower your monthly payment while maintaining borrower benefits which apply to your Stafford and/or PLUS loans.

Students who choose extended repayment option are able to reduce the total interest cost by almost $1000 when compared to consolidation.

Are deferments and forbearances available for consolidation loans?

In most cases, consolidation does not disqualify a borrower from certain deferment of forbearance options. However, borrowers may not qualify for a military deferment on aconsolidation loan if they include at least one loan disbursed prior to July 1, 2001. Following are the deferment and forbearance options that are available:

Deferment options:

  • Economic hardship
  • Unemployment
  • Military Service
  • At least half time enrollment

Forbearance Options:

  • Temporary Hardship
  • Internship/residency

Borrowers will need to contact their consolidation lender/servicer in order to apply for any type of deferment or forbearance.

How do I consolidate my loan?

You apply for a Direct Consolidation Loan through This process offers both electronic and paper options. You can complete the electronic application, as explained below or you can download and print a paper application from for submission by U.S. mail.

Once you sign in to using your personal identifiers and Federal Student Aid PIN, you will be able to electronically complete the Federal Direct Consolidation Loan Application and Promissory Note. The electronic application on consists of the following five steps:

1. Choose Loans & Servicer
2. Repayment Plan Selection
3. Terms & Conditions
4. Borrower & Reference Information
5. Review & Sign

After you submit your application electronically via or by mailing a paper application, the consolidation servicer selected will complete the actions required to consolidate your eligible loans. The consolidation servicer will be your point of contact for any questions you may have related to your consolidation application.

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.

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