A consolidation loan allows you to combine several types of federal student loans with various repayment schedules into one loan with one monthly payment. Your payments might be significantly lower than the 10-year standard repayment plan, and you might receive a lower interest rate than you’re currently paying on one or more of your loans.
To apply for loan consolidation, you must first access your loan information from the Federal National Student Loan Data System. Then, visit Federal Direct Consolidation Loans Information Center to begin the application process.
A consolidation loan can affect your payment amount, payment period and amount of interest:
You can consolidate during your grace period, once you've entered repayment (the day after the end of the six-month grace period) and during periods of deferment or forbearance.
To qualify for a direct consolidation loan, borrowers must have at least one direct loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment or default status. Loans that are in an in-school status cannot be included in a direct consolidation loan.
The interest rate for consolidation loans is a fixed rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on all of the loans you consolidate, rounded up to the nearest one-eighth of one percent. The interest rate will never exceed 8.25 percent.