A consolidation loan allows you (or your parents if they have a PLUS loan) to combine several types of federal student loans with various repayment schedules into one loan with one monthly repayment. Your monthly payments might be significantly lower than they would be under the 10-year Standard Repayment Plan. You might receive a lower interest rate than you're currently paying on one or more of your loans. It may be possible to obtain lower interest rates by consolidating while still in school.
You can get a consolidation loan during your grace period, once you've entered repayment, or during periods of deferment or forbearance. PLUS loans are eligible for consolidation once they are fully disbursed. Contact the consolidation department of a participating lender for an application and more information. If the same loan holder holds all the loans you want to consolidate, you must obtain your consolidation loan from that holder, unless you haven't been able to get a loan with income-sensitive repayment terms acceptable to you.
Take time to study your consolidation options carefully before you apply because there can be disadvantages when you consolidate. It can significantly increase the total cost of repaying your loans. Because you can have a longer period of time to repay, you'll make more payments and pay more interest. Consider whether you lose any borrower benefits if you consolidate, such as interest rate discounts, principal rebates, or any discharge (cancellation) benefits if you include a Federal Perkins Loan.
Consolidating All Prior Loans
Under provisions of the Ensuring Continued Access to Student Loans Act ("ECASLA") , lenders have the option to "PUT" (sell) loans to the U.S. Department of Education (DOE). Lenders must notify borrowers if their loans have been sold to the Department of Education.
- Currently enrolled students with Federal Stafford, GradPLUS, or PLUS loans should pay particular attention to the option to consolidate all of their prior federal loans into a Federal Direct Consolidation Loan between July 1, 2010 and June 30, 2011.
A Consolidation Loan allows you to combine all the federal student loans you received to finance your college education into a single loan. Borrowers will be able to consolidate all of their prior Stafford, Grad PLUS or PLUS Loans through the Federal Direct Consolidation Program.