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Consolidating Your Loans

Borrowers can combine multiple federal student loans into a single Direct Consolidation Loan, making the debt easier to manage. Simpler, though, is not always better, so the decision to consolidate should be made carefully.

Pros and Cons of Consolidating

A federal consolidation loan cannot be “undone,” once it has been disbursed, so weigh the advantages and disadvantages before taking the steps to consolidate.

Pros:

- a single payment to a single servicer

- possibly a lower monthly payment to help with monthly cash flow

- a fixed interest rate

- extended repayment period - up to 30 years - depending on the amount of debt and the repayment plan selected

- may make loans eligible for Pay As You Earn or Public Service Loan Forgiveness (PSLF)

Cons:

- may lose borrower benefits - such as interest rate discounts or principal rebates

- longer repayment period - possibly resulting in higher interest costs

- interest rate is a weighted average of the consolidated loans, rounded up to the nearest 1/8 of a percent

- may negatively impact grace, deferment, or forgiveness options

Which Loans Can Be Consolidated...and When?

Most federal education loans, including Stafford Loans, are eligible for consolidation after the borrower is no longer enrolled full-time, and even during the grace period.

  • Perkins Loans can be consolidated, but the subsidy and some extended grace options may be lost.
  • Federal PLUS Loans can be consolidated once they have been fully disbursed (as long as the borrower is enrolled less than half-time)
  • Consolidation Loans can be reconsolidated when including new loans (whether previously consolidated or not), or when attempting to move the loan into the Direct Loan program.

How to Consolidate

If your loans are in good standing, you can complete the Direct Consolidation Loan application online at: https://studentloans.gov External Link. Access to a paper application and additional directions are also available at this website.

If you are in default on a federal student loan, you may still be eligible for consolidation, but you need to meet certain requirements. Visit the Direct Loans External Link website for more details.

When Does Repayment Begin on a Consolidation Loan?

Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for a deferment or forbearance. Consolidation loans, like all federal education loans, do not have a prepayment penalty, so consolidation loans can be paid aggressively to save time and money.

Interest Rates for Consolidation Loans

The interest rate for Direct Consolidation Loans is fixed for the life of the loan and is based on the weighted average of the interest rates of the loans being consolidated.

Review the Consolidation Checklist

For additional details and step­by­step guidance, check out the Department of Education's full description of consolidation loans as well as its Consolidation Checklist External Link.

See Related Topics

Loan Repayment Options
Postponing Loan Repayment During Residency
Income-Based Repayment
Pay As You Earn Repayment

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Medloans® Organizer and Calculator

Medloans Organizer and Calculator

Organize and track your loans, then view sample repayment scenarios with the Medloans® Organizer & Calculator, the only Web tool of its kind developed for medical students.