Consolidating Federal Student Loans
Student borrowers may consolidate, or refinance, their federal student loans, including Direct, Stafford, and Perkins loans, into a federal consolidation loan. Borrowers may even consolidate just one loan.
There are two main reasons borrowers decide to consolidate their federal loans: a fixed interest rate and lower monthly payments. Other reasons include the convenience of having just one loan with one monthly payment and preventing one from defaulting on one's loans.
The consolidation loan is a new loan, so the borrower needs to complete an application and a promissory note. The borrower lists all of the various loans to be consolidated on the application. The eligible loans listed on the application are paid off by the consolidation loan. The application may be completed online, on paper, or over the phone (restrictions apply).
There are no fees, no credit checks, and no pre-payment penalties on a federal student consolidation loan.
The interest rate for a federal consolidation loan will be a fixed rate, which is determined by the weighted average of the interest rates on the loan(s) being consolidated, rounded to the nearest higher one-eighth of one percent.
Most of the current deferment and forbearance provisions of Direct student loans are retained after being consolidated. Specific deferment options include:
- In-school deferments;
- Graduate fellowship;
- Rehabilitation training;
- Economic hardship; and
- Unemployment.
Repayment terms range from 10 to 30 years, depending on the amount being refinanced.
Interest Rates
By consolidating your education loan(s), your interest rate will be fixed and determined by the weighted average of the interest rates on the loan(s) being consolidated, rounded to the nearest higher one-eighth of one percent. You may determine your interest rate by using the Repayment Estimator on the StudentAid.gov website; click on the Repayment & Consolidation tab.
Student borrowers may be able to reduce their federal consolidation loan interest rate by an extra 0.25 percent by electing to make their monthly payments through an automatic electronic debit from a bank account. This means that you authorize the payments to be made from your checking or savings account. Using automatic payment ensures that on-time payments will be made; this option should be considered by every borrower entering loan repayment. If you are interested in an automatic payment process, contact your consolidation loan servicer.
How to Apply
Information about federal loan consolidation may be found at StudentAid.gov; log in using your FSA ID, and click on the Repayment & Consolidation tab.
APPLY ONLINE at StudentAid.gov; log in using your FSA ID, and click on the Repayment & Consolidation tab.
APPLY USING A PAPER APPLICATION FORM. You may call your loan servicer to request a paper application.
You may call the Loan Consolidation Center at 800.557.7392 with any questions after you submit your application. The center is open Monday through Friday, 8 a.m. to 11 p.m. (EST).