Federal Student Loan Consolidation FAQ

Federal school Loan Consolidation is a great tool that allows borrowers to merge all of their federal loans into one new loan.
What are the benefits of federal consolidation loans?
Potentially reduce your monthly payment
Simplified finances - you make only one payment each month
Provides budget friendly repayment options
Saves you money today when you need it most

Student loan consolidation allows borrowers (parents or students) to lock in today's low rates and to combine several federal student loans into one loan, simplifying repayment. Because repayment can be spread over a longer time period, your monthly payment amount will be lower.
What about non-student loan debt, can that be consolidated?

For any other debt you may have, including credit cards and personal loan debt, debt consultation services exist to help making debt repayment easier and more affordable. You can reduce your debt up to 50% and become debt free in as little as 12-48 months. Find out more about debt consultation.

Free Non-Student Loan Debt Consultation

Do you have more debt outside of student loans? Please request a free debt consultation today. Consolidate your debt into one lower payment, avoid bankruptcy, and be debt free in as little as 12-48 months. Get Started Now!

Who is eligible for student loan consolidation?

To be eligible for federal student loan consolidation, borrowers must:
Not be in default
Not be in school more than half time for the loans being consolidation

Here are the things that are not required:
You do not need to be employed to consolidate your loans.
You do not need to have any form of collateral.
You do not need a cosigner of any kind.
Apply Now for Federal Student Loan Consolidation
What is the interest rate?

The rate will be a fixed rate equal to a weighted average of the interest rates on your existing loans rounded up to the nearest one-eighth of one percent.

Federal Consolidation interest rates are based on the weighted average of student loan interest rates. Federal student loans disbursed on or after July 1, 2006 have an interest rate of 6.8%. Federal Parent Plus loans disbursed after July 1, 2006 have an interest rate of 8.5%. Federal student loans disbursed before July 1, 2006 will remain variable interest rate loans. These loans will re-adjust every July 1 based on the results of the 91-day Treasury Bill. Currently, interest rates for these variable loans are:
Stafford Loans in grace: 1.88%
Stafford Loans in repayment: 2.48%
PLUS Loans: 3.48%
Perkins Loans: 5%
HEAL Loans: 4.125%
Previous consolidations: existing consolidation rate
Click here for updated information about consolidation loan interest rates.

Take a look at our Loan Calculator to help you figure out your new rate and monthly payment.

Please note that we cannot guarantee any interest rate due to the time it takes to process an application. We can only provide rough estimates; you should not rely on these estimates for financial planning! Why? Because consolidation takes between 30 - 60 days, and in that time period, you may be making payments, or your loan status may change. Because your interest rate is determined not only on the type of loan you have, but also on how much you owe, we can make no guarantee except to say that your interest rates will never exceed federally specified, published rates.
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What types of loans may be consolidated?
Stafford Loans - Subsidized and Unsubsidized
Federal Direct Stafford Loans - Subsidized and Unsubsidized
HEAL/HPSL Student Loans
Parent PLUS Loans
Federal Direct Parent PLUS Loans
Federal Consolidation Loans*
Federal Direct Consolidation Loans*
Perkins Loans
Nursing School Loans and more...

* Federal and direct consolidation loans cannot be reconsolidated unless additional loans are included. For example, if you consolidated your federal loans after your undergraduate degree and then wanted to also consolidate your graduate loans, you can combine the new loans with those that were reconsolidated.

Click here for private student loan consolidation.
What about private loan consolidation?

It's not a bad idea to consolidate your private student loans. What is a bad idea is combining federal and private student loans, which results in a consolidated private loan. This is bad for many reasons:
You cannot defer payments on a private loan consolidation if you want to go back to school. You can with federal loan consolidation.
You cannot forbear payments in case of economic hardship on a private loan consolidation.
You cannot claim interest as a tax deduction on a private loan consolidation.
You cannot apply for forgiveness on a private loan consolidation. Certain types of work, such as federal volunteer programs, teaching in economic development zones, and military service, among others, can qualify you to have part or all of your federal loans dismissed by the government.
If you should pass away, private loans are passed to your next of kin. Federal loans are forgiven.
Private loan consolidation very often has variable rates, which means you cannot lock in today's current historic low rates. Those rates may be tied to volatile indexes like the Prime Rate, which can jump as high as 13%.
Apply Now for Federal Student Loan Consolidation
What about credit card consolidation, car loans, etc.?

Unfortunately, you cannot combine non-federal loans of any kind with federal student loans. Why? Because they are different types of loans. Federal student loans are backed by the US Government; if a student doesn't pay their loans, the government pays the lender, and then obtains payment from the student. The lending institutions (typically banks) know that they will always get their money back, which is why they can offer student loans at such low rates compared to other kinds of loans.

Private loans, such as credit cards, car loans, mortgages, etc. are backed by an individual's creditworthiness and collateral. Lending institutions take higher risks in loaning money privately than through the government. The government and the banks will not permit low-risk loans to be combined with high risk loans, and so you cannot consolidate other forms of debt with your federal student loans.

However, consolidate student loans to improve your credit, and you may be able to qualify for better interest rates on your private loans when you refinance them.
What about consolidating with my spouse?

Spousal consolidation is no longer permitted. Sorry.
I consolidated in the past, can I do it again?

It depends. Consolidation is the combination of many loans into one. If you have consolidated in the past with someone other than the US Department of Education, you can't do it again unless:
You have new student loans that were not included in the original consolidation.
Or, you have multiple consolidations from different lenders.
How is the consolidation loan repaid?

The first payment is due no more than 30 days from the date the Consolidation loan is disbursed. Repayment schedule choices include:
Standard payments (fixed monthly payments over a fixed time)
Graduated payments (payments which gradually increase over the years)
Income-Sensitive payments (variable payment amounts based upon annual income) and
Extended payments (more than $30,000 over a 25 year period or more than $60,000 over a 30 year period).
Is there a credit check required to consolidate?

No, there is no credit check, because your federal student loans are guaranteed by the US Government.
Apply Now for Federal Student Loan Consolidation
Are there any early payment/repayment fees or penalties?

No, there are no early repayment penalties for a student loan consolidation. The government wants their money back. To make extra payments, consolidate now, and then when your payment schedule begins, simply specify "Extra payment to principal" on your early payments.

Did you know that early repayments are interest-free? It's true! Every dollar beyond your required monthly payment is paid towards the principal - it's like an interest-free payment!
Do I continue making loan payments while my consolidation application is in process?

Yes! Until you are notified that your loans have been paid off through the consolidation process, you should continue to make your student loan repayments. Since consolidation can take anywhere from 30 - 90 days, it's important that you don't fall behind on payments.
How long does student loan consolidation take?

Consolidation can take anywhere from 30 to 90 days; in rare cases it may take longer. The process to retrieve payoff statements (called LVCs - Loan Verification Certificates) from your lenders takes the longest amount of time.
What do I do if I am not eligible to consolidate?

If you've previously consolidated, have loans with just one lender, loans totaling less than $20,000, or other conditions which prohibit you from consolidating your federal student loans with us, there are a few options you can pursue:
Consider a private loan consolidation.
Consider a personal line of credit from your bank or credit union.
Visit our Student Credit and Debt Help information center.
Apply Now for Federal Student Loan Consolidation
Can I defer or forbear?

Yes! One of the greatest benefits of federal student loan consolidation is that you retain all your federal borrowing privileges, such as:
Deferment of your consolidation payments when you return to school
Forbearance of your consolidation for up to 36 months
Forgiveness of your entire loan if you pass away

How do you defer? Once you consolidate, you will receive paperwork for your payment schedule. At that time, you can request a deferment or forbearance form.

To get forms, click here!
Why do student loan rates change?

See our page on the relationship between student loans and Treasury bills!
Why Consolidate my Student Loans?

The very best time to consolidate your student loans is immediately after graduating, before your grace period ends. Doing so allows you to lock in the lowest possible interest rate on your loans.

Consolidating is a great option whenever you want to increase your monthly cash flow - by consolidating, you extend your repayment term and get additional discounts on your existing rates, which reduces the monthly payment you make.
Repayment Guidelines

Depending on the total amount of your consolidation loan, the government has set the following repayment periods: