Federal DIRECT Consolidation Loan Program

This program enables you to combine any or all of your eligible outstanding federal student loans into one new loan with one monthly payment. The new loan will have a fixed interest rate set at the weighted average of the interest rates of the underlying loans. It may have an extended repayment period of up to 30 years.

Federal Direct Consolidation Loans allow highly indebted borrowers with limited income to access the Income-Based Repayment Plan (IBR).

Also, those who plan to work in certain "public service" careers may benefit from the Public Service Loan Forgiveness program if they consolidate. Learn more.

Loans Eligible for Consolidation

Private loans from banks, schools or family members cannot be consolidated. Loans from the following programs are eligible:

• Subsidized and Unsubsidized Federal Stafford Loans
• Federal Perkins Loan
• Health Professions Student Loans (HPSL)
• Health Education Assistance Loans (HEAL)
• Loans for Disadvantaged Students (LDS)
• Federal Graduate and Professional Student PLUS Loans
• Federal Parent PLUS Loans. (Parents may consolidate existing Federal Parent PLUS Loans, but students may not consolidate Federal Parent PLUS Loans with student loans.)

Before You Consolidate . . .

Obtain your federal loan history and lender contact information at www.nslds.ed.gov. Compare your current loans’ interest rates, deferment options and repayment incentives with those of a Federal Direct Consolidation loan. Ask whether you will be eligible for your full grace period.

Consolidation Benefits

• If you have borrowed substantial amounts and are in a low income field and might benefit from the Income-Based Repayment (IBR) Plan, you should consider consolidating your loans.
• If you will work in certain "public service" jobs and can benefit from the Public Service Loan Forgiveness Program, you should consider consolidating your loans.

Consolidation drawbacks

• Consolidated Federal Parent PLUS Loans do not qualify for IBR or Public Service Loan Forgiveness
• If the loans you consolidate are repaid over a longer term, your total cost will increase.
• The interest rate reductions and other benefits you are offered may not be as favorable as the ones you receive on your existing Federal Stafford and PLUS Loans.
• You may end up with a higher interest rate on the consolidation loan than on some of your original loans, because the interest rate is based on a weighted average, then rounded up.
• If you consolidate a Federal Perkins Loan, you may lose some of the loan cancellation benefits.

Alternatives to Consolidation

• Change your current repayment plan to lower your monthly payment.
• Request combined billing, to simplify repayment.
• Apply for a deferment or forbearance, to postpone or reduce your monthly payment.

For More Information

www.ibrinfo.org
www.loanconsolidation.ed.gov