The U.S. Department of Education has significant power to force borrowers to repay defaulted federal education loans. Borrowers should learn about the potential consequences of default before taking out the loans.
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Home
Student Loans
Repay Student Loans
Repayment Plans for Federal Student and Parent Loans
How to Consolidate Federal Student Loans
Federal Student Loan Consolidation
What is Student Loan Consolidation?
Federal student loan consolidation is a process by which you combine several federal student loans into one new loan called a Direct Consolidation Loan. A Direct Consolidation Loan can only be used for federal student loans. If you are looking to consolidate existing private student loans or consolidate federal student loans and existing private student loans together, you will need to explore student loan refinancing with a private loan lender rather than new direct consolidation loans.
What Types of Student Loans Can Be Consolidated?
When exploring a new Direct Consolidation Loan it’s important to note that this option is only available for federal student loans only. If you have all private loans or a mix of both private loans and federal loans, the best option would be to look into student loan refinancing through a private loan lender.
Student loans eligible for a Direct Consolidation Loan include:
- Subsidized student loans
- Unsubsidized student loans
- Parent PLUS Loans
- Grad PLUS Loans
- Perkins Loans
Student Loan Consolidation Rates
Unlike private student loan refinancing, where you may compare lenders and shop around for the best interest rate, a Direct Consolidation Loan will use the weighted average interest rate of your existing loans rounded up to the nearest 1/8 of a percent to determine your new interest rate. That means, your rate will stay roughly the same. You can learn how weighted average interest is calculated here. We also recommend using our student loan refinance calculator to get a snapshot of what to expect when you consolidate.
If your aim is to lower your interest rate, you will want to pursue private student loan refinance.
Best Student Loan Refinance Lenders
SoFi Student Loans
- Rates as low as 2.25% variable and 2.74% fixed1
- No fees or prepayment penalties
- Unemployment protection
- Show more info »
1Fixed rates from 2.74% APR to 6.94% APR (with AutoPay). Variable rates from 2.25% APR to 6.59% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.1% plus 2.40% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
College Ave Student Loans
- Variable rate range: 2.94% – 6.74% APR1
- Fixed rate range: 2.99% – 6.84% APR1
- No application or prepayment fees
- Apply in 3 minutes or less for instant credit decision
- Show more info »
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
Information advertised valid as of 9/30/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
Discover Private Consolidation Loan
- Consolidate federal and private student loans
- Zero Fees
- Choice of fixed or variable interest rate
- 0.25% interest rate reduction while enrolled in automatic payments1
- The minimum consolidation loan amount is $5,000.
- Subject to credit approval, borrowers can consolidate up to the aggregate amount of their education loan debt. Maximum limits may apply.
- Show more info »
1Visit DiscoverStudentLoans.com/AutoDebitReward for terms and conditions.
2Lowest APRs shown for Discover private consolidation loans are available to the most creditworthy applicants who are approved and choose a shorter repayment term, and include a 0.25% interest rate reduction while enrolled in automatic payments.
The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.125% as of October 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APRs are only available to applicants with the best credit. The APR will be determined after an application is submitted. It will be based on credit history, the selected repayment option and other factors, including a cosigner’s credit history (if applicable). If a student does not have an established credit history, the student may find it difficult to qualify for a private student loan on their own or receive the lowest advertised rate. Learn more about Discover Student Loans interest rates.
3Lowest APRs shown for Discover private consolidation loans are available to the most creditworthy applicants who are approved and include a 0.25% interest rate reduction while enrolled in automatic payments.
The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.125% as of October 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APRs are only available to applicants with the best credit. The APR will be determined after an application is submitted. It will be based on credit history, the selected repayment option and other factors, including a cosigner’s credit history (if applicable). If a student does not have an established credit history, the student may find it difficult to qualify for a private student loan on their own or receive the lowest advertised rate. Learn more about Discover Student Loans interest rates.
PenFed Student Loans Powered by Purefy
- Refinance federal and/or private student loans at lower rates with no fees.
- Choose a 5, 8, 12, or 15 year term to best fit your needs.
- Each applicant receives a personal loan advisor to help them through every step in the process.
- Spouses can refinance their loans together. Parents can refinance their loans too.
- Show more info »
1Rates and offers current as of April 1, 2021. Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99% APR to 5.15% APR and Variable Rates range from 2.15% APR to 4.45% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%.
You Put in the Work. Now Reap the Rewards.
- Variable Rates between 1.95% - 5.65% APR1
- Fixed Rates between 2.48% - 6.62% APR1
- No application or prepayment fees
- Cosigner release with 24 consecutive on-time payments2
- Show more info »
1Interest Rates
Fixed interest rates range from 2.48% APR (with auto debit discount) to 6.62% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. The fixed interest rate will remain the same for the life of the loan.
Variable interest rates range from 1.95% APR (with auto debit discount) to 5.65% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. The variable interest rate is equal to the One-Month London Interbank Offered Rate (“One-Month LIBOR”) plus a margin. The One-Month LIBOR in effect for each monthly period (from the first day of the month through and including the last day of the same month) will be the highest One-Month LIBOR published in The Wall Street Journal “Money Rates” table on the twenty-fifth (25th) day (or if such day is not a business day, the next business day thereafter) of the month immediately preceding such calendar month. The Annual Percentage Rate (APR) for a variable interest rate loan will change monthly on the first day of each month if the One-Month LIBOR index changes. This may result in higher monthly payments. The current One-Month LIBOR index is 0.09% as of October 1, 2021.
Auto Debit Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.
The lowest rate for each loan type requires automatically withdrawn (“auto debit”) payment. The lowest rate is available only to the most creditworthy applicants. Not all borrowers will receive the lowest rate. The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, (3) the loan type selected, and (4) the highest level of education attained. If approved, applicants will be notified of the rate qualified for within the stated range.
2Cosigner Release. A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:
- The account must have been in full principal and interest repayment for at least 24 months.
- Twenty-four consecutive, on-time principal and interest payments, or lump sum equivalent, must have been made. NOTE: A lump sum payment does not replace the requirement to have been in full principal and interest repayment for at least 24 months. Interest-only or fixed-pay payments while enrolled in school do not qualify towards the 24 consecutive on-time payments.
- The loan must be current at the time of request.
- The loan must not have been in deferment, hardship forbearance, or other alternative payment assistance plan within the past 24 months.
- The loan must not have been permanently modified from its original terms in the credit agreement.
- The primary borrower must be a U.S. citizen or have permanent residency in the United States.
- The primary borrower must meet the age of majority requirement in their permanent state of residency.
Requirements are subject to change. If all of these conditions have been met, then an application for cosigner release may be submitted. The primary borrower is required to demonstrate they have the ability to assume sole responsibility for the loan(s) by providing proof of income, meeting debt-to-income requirements, and having a satisfactory credit history. (A credit report will be obtained during the review process).
3Refinance Loan Eligibility: You must be a U.S. citizen or permanent resident alien with a valid U.S. Social Security number, and be the legal age to enter into binding contracts in your state/territory of residency, or be at least 17 years of age and apply with a cosigner who is at least the age of majority in their state/territory. Non-residents can apply with an eligible cosigner who is a U.S. citizen or permanent resident alien with a valid U.S. Social Security number. The student loans you refinance must be in their grace or repayment period, and you can no longer be enrolled in school on a half-time or more basis. You must have at least $5,000 in student loans to refinance. You, or your eligible cosigner, must have an annual income of at least $36,000. Approval subject to credit review. Other credit criteria may apply.
Refinance Loan Limits:
Minimum loan amount: $5,000
Maximum student loan limits:
$125,000 for borrowers with an undergraduate degree.
$175,000 for borrowers with a graduate, MBA, or law degree.
$500,000 for borrowers with a graduate health professional degree.
Nelnet Bank, and any associated logos or design marks, are trademarks or service marks of Nelnet, Inc. All loan programs and terms are subject to change or may be discontinued at any time without notice. Certain restrictions and limitations may apply.
Should I Consolidate My Student Loans?
Whether or not you should pursue a new direct consolidation loan depends on what you want to achieve. Here are some of the reasons you may want to consolidate your federal student loans.
Benefits of Consolidating Federal Student Loans
- A single monthly payment will streamline new direct consolidation loan repayment.
- Consolidation of federal student aid provides access to alternate loan consolidation repayment plans that can reduce the monthly federal loan payment by increasing the term of the loan. This can free up money to repay loans with higher interest rates, such as credit cards, that also do not provide tax-deductible interest.
- If you have FFELP loans which are not eligible for certain income-driven repayment plans, military benefits, or public service loan forgiveness, you can consolidate these federal loans into a new Direct Consolidation Loan to become eligible.
- If you are interested in Public Service Loan Forgiveness and you do not have federal Direct Loans, you will need to move your existing federal student loans into a new Direct Loan program through consolidation.
- Depending on your outstanding federal education loan debt balance, you can increase your federal education loan term by consolidating, which also means you will have a lower monthly payment with a new direct consolidation loan.
- A consolidation loan may be used to switch federal loan servicers if you don’t like your current federal loan servicer.
Drawbacks to Consolidating Student Loans
- Your goal is to lower your federal loan interest rate, consolidating fixed-rate federal student loans does not save you any money, since the interest rate on a federal consolidation loan is based on the weighted average of the interest rates on the student loans included in direct loan consolidation. It may even increase the costs slightly since the weighted average interest rate of a new direct consolidation loan is rounded up to the nearest 1/8th of a point. If your goal is to lower your interest rate, you should consider refinancing your federal student loan(s) with a private student loan refinance lender.
- While direct loan consolidation may yield a lower monthly payment because of a longer repayment term, a longer repayment term may cause you to pay more interest over the life of the loan. Some borrowers are tempted to choose the repayment plan with the lowest monthly payment, even when they can afford to make a higher monthly payment on their student loans. Choosing a longer repayment term also often means that you may still be repaying your student loans when your children are applying for their own federal student aid because the repayment term can be as long as 30 years.
- If the interest rates on the separate student loans differ significantly, you may be able to save money by accelerating repayment of the federal education loans with the highest interest rate. You cannot target the highest-rate student loans for early repayment if the student loans have been consolidated.
- If you have yet to exhaust the entire grace period on your student loans, and you decide to consolidate them, you will lose the remainder of your grace period immediately. Direct Consolidation Loans do not have a grace period and will enter repayment immediately after the consolidation is complete.
- And outstanding unpaid interest is capitalized when federal education loans are consolidated. You will increase your outstanding principal balance on your loans once interest is capitalized.
Perkins Student Loans lose several important benefits when they are included in a consolidation loan. If you include a federal Perkins Loan in your Direct Consolidation, your Perkins Loan funds will no longer be considered a subsidized loan, and you would no longer be eligible for federal Perkins Loan cancellation options. Perkins Loan cancellation (otherwise known as forgiveness) is known to be generous and offered to a variety of borrowers who work in particular occupations.
How to Consolidate Federal Student Loans
To consolidate your federal student loans you will first need to log into your account at studentaid.gov with your FSA ID. There you can complete the Direct Consolidation Loan application. You will need the following information for a new Direct Consolidation Loan application:
- FSA ID
- Personal information such as personal address, email address and phone number
- Financial information such as income
You will be able to complete the Direct Consolidation Loan application in roughly 30 minutes or fewer online. If you do not want to apply for a new Direct Consolidation Loan online, paper applications are available for download.
Questions to Ask When Consolidating Federal Student Loans
Will I lose credit toward existing repayment plans on my federal loans?
Yes. When you consolidate your federal loans it will resent your payments for both income-driven repayment plan forgiveness, and Public Service Loan Forgiveness (PSLF). Which essentially means you will lose your “credit” toward public service loan forgiveness and/or income-driven repayment plan forgiveness regarding on those specific student loans you consolidate.
How much does it cost to consolidate federal student loans?
Student loan consolidation is free through the Direct Consolidation Loan program.
Federal Student Loan Consolidation FAQs
Is it smart to consolidate your federal student loans?
Consolidating your student loans may be the right move depending on what you want to accomplish. If you want to reduce your monthly payment by lengthening your repayment term, or roll multiple student loans into one, it may be the right option for you. If you have a Parent PLUS Loan and want to qualify for Public Service Loan Forgiveness, you will need to consolidate your loans and repay the new direct consolidation loan with an income-contingent repayment plan.
Can you consolidate private student loans?
You cannot consolidate private education loans with a new Direct Consolidation Loan because they are not federal student aid. However, you may choose to refinance private education loans—or refinance federal and private student loans together—with a private loan lender.
Can Grad PLUS loans be consolidated?
Yes. Grad PLUS Loans are eligible for a new Direct Consolidation Loan. You may also choose to consolidate your undergraduate and graduate loans together, as long as they are all federal education loans rather than private education loans.
Can you consolidate Parent PLUS Loans?
Yes. Parent PLUS Loans are eligible for consolidation, by their borrower, the parent. If the parent has their own student loans, they may include these loans in the consolidation.
Best Companies for Parent Student Loan Refinance
SoFi Student Loans
- Rates as low as 2.25% variable and 2.74% fixed1
- No fees or prepayment penalties
- Unemployment protection
- Show more info »
1Fixed rates from 2.74% APR to 6.94% APR (with AutoPay). Variable rates from 2.25% APR to 6.59% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.1% plus 2.40% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
PenFed Student Loans Powered by Purefy
- Refinance federal and/or private student loans at lower rates with no fees.
- Choose a 5, 8, 12, or 15 year term to best fit your needs.
- Each applicant receives a personal loan advisor to help them through every step in the process.
- Spouses can refinance their loans together. Parents can refinance their loans too.
- Show more info »
1Rates and offers current as of April 1, 2021. Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99% APR to 5.15% APR and Variable Rates range from 2.15% APR to 4.45% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%.
The child who benefitted from the loan can not include parent PLUS Loans that they are not the listed borrower of, in a consolidation loan under their name. In other words, the debt can’t be transferred to the child in the federal student loan program. However, some private student refinance lenders will allow parents to transfer their debt to their child with a private education loan refinance loan. The child would need to qualify for the refinance loan on their own.
Can you consolidate Parent PLUS Loans with student loans?
Yes. If you as the parent have Parent PLUS Loans as well as your own student loans you may consolidate those together. You may not consolidate Parent PLUS Loans with federal student loans borrowed in your child’s name. Those loans would need to be consolidated separately by your child.
Can you consolidate federal student loans?
Yes. In fact, the Direct Consolidation Loan is specifically for consolidating federal student loans.
Can my spouse and I consolidate student loans?
No. You may not consolidate federal student loans with your spouse through the Direct Consolidation Loan program, however some private lenders such as PenFed will allow you to consolidate your student loans with your spouse via a private student loan refinance.
Are consolidated student loans eligible for forgiveness?
If you have a new Direct Consolidation Loan, your loan could be eligible for Public Service Loan Forgiveness you if you meet all the required eligibility criteria. Federal consolidation loans also qualify for all federal discharge options, which includes, discharge upon death of the borrower (or child who benefitted from the loan), or total and permanent disability.
How to consolidate student loans for a lower interest rate
If you’re looking to lower your interest rate, you will want to consolidate your student loans with a private lender (referred to as student loan refinance). Private education loan refinancing allows you to shop around for the best interest rate.
How do I find my student loan account number?
Log into studentaid.gov with your FSA ID to locate information related to your federal education loans. There you will be able to see all of your current federal student loans, balances and the student loan servicers. You can also log into your student loan portal with your student loan servicer, or you can check your federal student loan statement.
When can I consolidate my student loans?
You may fill out a direct consolidation loan application at any time once they have entered the grace period, however if you consolidate student loans before the end of your six-month grace period, you will need to begin repaying your consolidation loan right away.
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