Consolidation FAQs

QUESTIONS FEDERAL DIRECT LOAN CONSOLIDATION
Provided by the U.S. Department of Education 		FEDERAL LOAN CONSOLIDATION
Provided by banks and other private lenders
Who qualifies for consolidation loans? Borrowers with at least one direct loan and students whose lender do not offer an acceptable Income Sensitive Repayment plan. Borrowers with at least one loan.
Why would I consolidate my educational loans?
  • To reduce monthly payments by extending the repayment period
  • To lock in a lower fixed interest rate on variable rate loans
  • To have one payment instead of several each month
  • To have one servicer to work with for deferments and other benefits
What are the drawbacks?
  • You will not benefit from further interest reductions on variable interest loans.
  • You lose some cancellation privileges with Perkins loans, such as teaching in economic hardship areas.
  • If payments are extended, the amount paid in interest will increase over the loan repayment period.
  • You may lose grace period, deferment, and cancellation provisions for some loans.
When can I consolidate my loans?
  • In grace period
  • In repayment
    Note: Interest rates are 0.6% lower if consolidated before the repayment period begins.
  • In deferment
  • In default (Borrower must make arrangements with federal Direct Loan Origination Center)
  • In grace period
  • In repayment
  • Note: Stafford interest rates on loans are 0.6% lower if consolidated before the repayment period begins.
Where can I consolidate my loans? Direct Loan Origination Center's Consolidation Department If all your loans are from a single lender, you must check first to determine whether your lender will provide an acceptable income-sensitive repayment plan. Otherwise, you may apply with any lender.
Can I reconsolidate a single consolidation loan? Yes No
What types of repayments are possible?
  • Standard
  • Extended
  • Graduated
  • Income contingent
  • Alternative
  • Standard
  • Extended
  • Graduated
  • Income sensitive
What interest will be charged? Weighted average of all loans included in consolidation rounded to the nearest higher one-eighth percent; capped at 8.25%; 9% if PLUS. Weighted average of all non-HEAL loans rounded to the nearest higher one-eighth percent capped at 8.25%; 9% if PLUS, and HEAL loans at special refinance rate.
Do I consolidate my subsidized and unsubsidized and PLUS loans separately? No. Your consolidation loan will be split into a subsidized portion that incorporates all the subsidized loans, an unsubsidized portion, and PLUS portion, if applicable.
Will my consolidation loan have a grace period? Yes, if the consolidation includes a loan for which you have in-school status. No
Can I consolidate a defaulted loan? Yes, but repayment plan will be income contingent unless other conditions are met. No, unless the loan is rehabilitated.
Can married borrowers consolidate their loans together? No
Can the loan be canceled if I die or become totally disabled? Yes
What happens to the grace period on my loans?
  • You lose any remaining months of grace if you consolidate during the grace period of the loans.
  • You retain a six-month grace period if you consolidate with in-school status.
 You lose any remaining months of grace if you consolidate during the grace period of the loans.
What about in-school deferments? In-school deferment is available.
What about the economic hardship deferment? Up to three years. Remaining portion of the three-year economic hardship deferment.
What about unemployment deferments? Up to three years.
What about deferments for an approved graduate fellowship or rehab program? Yes
What about the interest-free subsidy during deferments?
  • Perkins Loans remain interest free during deferment.
  • You lose Perkins cancellation provisions for teaching, public, or military service.
  • HEAL, Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDS) lose their interest-free status when consolidated even in deferment.
  • Perkins Loans lose their interest-free status during deferment.
  • You lose cancellation provisions for teaching, public, or military service.
  • HEAL, Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDSL) lose their interest-free status when consolidated even in deferment.