We have designed the information below to answer questions you may have about federal loan consolidation but it is only a guide. Ultimately you will have to determine whether consolidation meets all, or some, of your loan repayment concerns. If you have questions about consolidation then we recommend you speak with your lender(s). However, you are welcome to email the financial aid office at firstname.lastname@example.org as well.
Before you consolidate, you should weigh the benefits and drawbacks of consolidation:
Benefits of consolidation:
- Lock in your interest rate
When you consolidate, your lender will use the interest rates on all of the loan you include in the consolidation and calculate a new fixed interest rate that is weighted to the nearest 1/8th percent.
- Bring multiple loans to one loan servicer
Consolidation may make your repayment easier because you will have one lender. You will also have one lender through which you will file for deferment and forbearance.
- Consolidation lenders often offer various repayment incentives to lower repayment costs
Incentives are often connected with: electronic auto pay (typically a 0.25% interest rate reduction) and/or on-time repayment (typically a 1% rate reduction for a set number of on-time payments). Check with your lender for details.
- Consolidating your loans with Direct Loans allows you to take advantage of the Public Service Loan Forgiveness program.
Drawbacks of consolidation:
- Lose any borrower benefits (such as a reduced interest rate) offered by your lender(s)
- You cannot refinance the consolidated loan at a later date for a better rate if rates are lower in the future. The interest rate is locked for the life of the loan.
For more information about Direct Consolidation Loan visit loanconsolidation.ed.gov or call 1-800-557-7392.