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Federal Loan Consolidation


Loan Consolidation is a process whereby you can combine your existing Federal student loans issued at different times and at different interest rates into one new loan, thereby extending the repayment term up to 25 years and allowing you to make a single monthly payment.  You can consolidate your Federal loans with the Department of Education under the William D. Ford Federal Direct Consolidation Loan Program.  To obtain a William D. Ford Direct Consolidation Loan, contact the Direct Loan Origination Center's Consolidation Department at 1-800-557-7392 or go to www.loanconsolidation.ed.gov. 
  • The interest rate of the new Federal Direct Consolidation Loan will be the weighted average of the interest rates of the loans to be consolidated rounded to the nearest 1/8th of a percent, capped at 8.25%.
  • Your private or Fordham Revolving Loans cannot be included in a Federal Direct Consolidation Loan.
  • Most Federal loans are eligible for consolidation.
  • If you have borrowed through the Federal Perkins Loan Program as an undergraduate, you may be eligible for cancellation of up to 100% of the outstanding balance on these loans for law enforcement or family service agency work.  You will lose this benefit if you include your Perkins Loans in a Federal Direct Consolidation Loan.
  • Repayment options on a Federal Direct Consolidation Loan are basically the same as those offered on your existing Federal loans.  Instead of the Income Sensitive Repayment option, you may opt for the Income Contingent Repayment option under the Federal Direct Consolidation Loan Program. 
  • If you are planning to work in the public sector for ten years or more, you may obtain forgiveness of the balance remaining on your eligible Federal loans after 120 monthly payments on these loans in a Federal Direct Consolidation Loan.  See the Federal Public Service Loan Forgiveness Program.

Should I Consolidate My Federal Loans?

You may wish to consider consolidation, if

  • you have eligible Federal loans with variable interest rates and want to lock in the rate on those loans.  Timing is a factor when consolidating your variable rate loans.  The interest rate on variable rate Federal loans increases .6% when those loans go into repayment, so consolidate before your grace period ends.
  • you do not qualify for Extended Repayment or Income Based Repayment, but need to reduce your monthly loan repayments (over $30,000 in Federal debt qualifies you for Extended Repayment).
  • you have multiple loan holders/servicers and want to pay your Federal loans with a single monthly payment.
  • you borrowed a considerable amount in Grad PLUS Loans at 8.5% and have no repayment incentives available to you to reduce that rate and wish to take advantage of the PLUS Loan Rate Loophole to reduce the interest rate on your Grad PLUS Loans from 8.5% to 8.25%.  Remember, the interest rate on a Federal Direct Consolidation Loan is the weighted average of the interest rates of the loans to be consolidated rounded up to the nearest 1/8%, not to exceed 8.25%!
  • most importantly, you want to take advantage of the Federal Public Service Loan Forgiveness Program–to be eligible, you must consolidate your FFELP Loans under the Federal Direct Consolidation Loan Program.