Loan Consolidations
A Direct Consolidation Loan allows
borrowers with multiple federal student loans to combine them into
a single new federal loan, with one monthly
payment.
The new interest rate is a weighted average of the rates on the loans
being consolidated, rounded up to the nearest
one-eighth of a percent. It is not usually "lower," but it can
simplify repayment and sometimes reduce the monthly
payment.
Consolidating often extends the repayment period, which can make
monthly payments more manageable. However, paying over a longer
period can result in a higher total repayment
amount because interest accrues over time.
Potential benefits of consolidation include:
-
Reducing the number of monthly loan payments to just one
-
Lowering your total monthly payment amount
-
Helping you avoid loan default or poor credit
-
Bringing a defaulted federal loan back into good standing
Important considerations:
Some features of your original loans, such as grace periods,
interest rate discounts, or certain loan forgiveness or
cancellation benefits, may not carry over to the consolidated loan.
Always review the terms carefully to be sure the advantages
outweigh the trade-offs for your situation.
Tip: Before consolidating, check
whether any of your current loans qualify for special benefits,
like interest subsidies, Perkins Loan cancellation, or targeted
forgiveness programs, since you could lose them once the loans are
combined. Use the
Loan Simulator at
StudentAid.gov to compare your current repayment plan
with what consolidation would offer. This can help you see the real
impact on your monthly payment and the total cost over time.
Learn more at Consolidating Student Loans at StudentAid.gov