With a Federal Direct Consolidation Loan, which is made by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program, it’s possible to combine one or more federal student loans into one new loan. All, some, or just one federal student loan can be consolidated under this program. 

There are various repayment options under the Direct Consolidation Loan program, including a standard repayment plan, a graduated repayment plan, an extended repayment plan, the Income-Contingent Repayment Plan (ICR), the Pay As You Earn, and the Income Based Repayment Plan (IBR).

Most federal student loans are eligible to be consolidated under the Direct Consolidation Loan program. There is no fee to consolidate federal student loans into a Direct Consolidation Loan.

Pros and Cons to Direct Consolidation Loans

After consolidation, you’ll only have to make one loan payment per month instead of multiple payments on your various federal student loans. In many cases, this will make it easier to manage your debt. Another benefit to consolidation is that the monthly payment on a Direct Consolidation Loan may be less than the combined payments that were previously due each month on the individual loans that were consolidated.

Of course, there are also downsides to consolidation. For example, consolidating certain federal student loans could cause the loss of certain benefits, such as reduced interest rates or repayment incentive programs that are available under the loans being consolidated.

Eligibility for a Direct Consolidation Loan

You have to include at least one Direct Loan or Federal Family Education Loan (FFEL) program loan that is in a grace period or a repayment period (including loans that are in a forbearance or deferment) in the consolidation to qualify for a Direct Consolidation Loan. (Other types of eligible federal student loans can be consolidated as well, so long as they’re combined with at least one Direct Loan or FFEL program loan.) Loans that are in an in-school status are not eligible to be included in a Direct Consolidation Loan

Federal Student Loans You Can Consolidate

Almost all federal student loans can be consolidated under the Direct Consolidation Loan program. Among others, Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Federal Supplemental Loans for Students (SLS), Federal Perkins Loans, and certain kinds of existing consolidation loans can be consolidated. 

Information about your federal student loans, including loan amounts, outstanding balances, loan statuses, and disbursements can be accessed through the National Student Loan Data System (https://www.nslds.ed.gov), the Department of Education’s central database for student aid.

Restrictions on Consolidation

There are some restrictions on loans that can be consolidated under the Direct Consolidation Loan program.

For example, private student loans (those that are not federally guaranteed) are not eligible for consolidation. Also, married couples can’t combine their individual loans into in a single, shared Direct Consolidation Loan. If there is a court judgment on a defaulted loan, that loan can’t be included in the consolidation unless the judgment has been vacated.

Defaulted loans can be included in the consolidation, but there are some special requirements.

Consolidating Defaulted Federal Student Loans

Consolidating your federal student loans under the Direct Consolidation Loan program is one way to get out of default, though you must:

make satisfactory repayment arrangements with the current loan holder before consolidating (which usually this means making three consecutive, voluntary, on-time, full monthly payments); or

agree to repay the new Direct Consolidation Loan under either the Income Contingent Repayment Plan, the Pay As You Earn Repayment Plan, or Income-Based Repayment Plan.

Consolidating Your Existing Consolidation Loans

There are some circumstances when an existing consolidation loan can be consolidated into a Direct Consolidation Loan. This is called “reconsolidation.”

For example, an eligible federal student loan can be added to an already existing Direct Consolidation Loan within 180 days after the date the consolidation loan was made. (A Direct Consolidation Loan is “made” on the date the first loan being consolidated is paid off.) Also, you can get a new Direct Consolidation Loan to combine your existing Direct Consolidation Loan or Federal Consolidation Loan with an additional eligible federal student loan (or loans) that you got before or after the date of the existing consolidation loan.

An existing Federal Consolidation Loan can be consolidated into a Direct Consolidation Loan (without adding an additional loan) under certain circumstances as well.

How to Apply for a Direct Consolidation Loan

An application for a Direct Consolidation Loan can be submitted:

  • online at https://studentloans.gov or
  • by downloading an application and mailing it to the selected consolidation servicer.

Where to Learn More About Direct Consolidation Loans

To obtain further information about a Direct Consolidation Loan before submitting an application, contact the Loan Consolidation Information Call Center at 1-800-557-7392. After submitting an application, contact the consolidation servicer. (The loan servicer is the company that processes the payments, among other things, on a federal student loan.)

For general information about Direct Consolidation Loans, go to the U.S. Department of Education’s website at www.studentaid.ed.gov or the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov.

Overview of Federal Student Loan Consolidation – Direct Consolidation Loans

“Consolidating” your student loans is a process that consists of taking out a new loan to replace the original loans (In a way, consolidating is similar to refinancing and also has pros and cons)

With a Federal Direct Consolidation Loan, which is made by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program, it’s possible to combine one or more federal student loans into one new loan. All, some, or just one federal student loan can be consolidated under this program. 

After consolidation, there is only one loan payment required per month instead of multiple payments on your various federal student loans. This typically makes it easier for most people to manage their debt. Another benefit to consolidation is that the monthly payment on a Direct Consolidation Loan may be less than the combined payments that were previously due each month on the individual loans that were consolidated. (There are also downsides to consolidation. For example, consolidating certain federal student loans could cause the loss of certain benefits, such as reduced interest rates or repayment incentive programs that are available under the loans being consolidated.)

There are several repayment options for a Direct Consolidation loan, including plans that base the required monthly payment amount on your income. Changing your repayment plan to a different plan, later on, is possible in most cases.

Almost all federal student loans are eligible for the Direct Consolidation Loan program. To apply for a Direct Consolidation Loan, go online or submit a paper application.

Eligibility Requirements for a Direct Consolidation Loan

To consolidate under the Direct Consolidation Loan program, you must have at least one Direct Loan or Federal Family Education Loan (FFEL) program loan that is:

in a grace period (the period of time after your graduate, leave school, or drop below half-time enrollment when you are not required to make payments on certain federal student loans) or in a repayment period (including loans that are in a forbearance or deferment period.)

Federal Family Education Loan (FFEL) program: Under the FFEL program, private lenders gave loans to students that the federal government guaranteed. Some examples of this type of loan include Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. Private lenders no longer make federal student loans under the FFEL Program. Now, the U.S. Department of Education provides all new federal student loans under the Direct Loan program.

Direct Loan: A Direct Loan is a federal student loan that comes directly from the U.S. Department of Education as part of the William D. Ford Federal Direct Loan Program. For example, Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans are types of Direct Loans.

Note to students: Loans that are in an “in-school” status cannot be consolidated. However, loans that are in an in-school deferment status can be consolidated.

Example. Say you stopped attending school for over a year. During this time, your six-month grace period expired and your loans entered the repayment period. You then went back to school, took out new student loans, and received an in-school deferment on your previous loans that had had entered into the repayment period. You can apply for a Direct Consolidation Loan for the loans that are in an in-school deferment status.

Federal Student Loans That Can Be Consolidated

Most federal student loans can be consolidated into a Direct Consolidation Loan. Specifically, the following loans are eligible for consolidation under this program:

  • Subsidized Federal Stafford Loans
  • Guaranteed Student Loans
  • Federal Insured Student Loans (FISL)
  • Direct Subsidized Loans
  • Direct Subsidized Consolidation Loans
  • Federal Perkins Loans
  • National Direct Student Loans (NDSL)
  • National Defense Student Loans (NDSL)
  • Federal PLUS Loans (for parents or for graduate and professional students) 
  • Parent Loans for Undergraduate Students (PLUS)
  • Direct PLUS Loans (for parents or for graduate and professional students)
  • Direct PLUS Consolidation Loans
  • Federal Consolidation Loans
  • Unsubsidized and nonsubsidized Federal Stafford Loans
  • Federal Supplemental Loans for Students (SLS)
  • Direct Unsubsidized Loans
  • Direct Unsubsidized Consolidation Loans
  • Auxiliary Loans to Assist Students (ALAS)
  • Health Professions Student Loans (HPSL)
  • Loans for Disadvantaged Students (LDS)
  • Health Education Assistance Loans (HEAL)
  • Nursing Student Loans (NSL)

Information about your federal student loans, including loan amounts, outstanding balances, loan statuses, and disbursements can be accessed through the National Student Loan Data System (NSLDS) at https://www.nslds.ed.gov, which is the Department of Education’s central database for student aid.

You’ll need a Federal Student Aid (FSA) ID (a username and password) to access the system. You can apply for an FSA ID by going to https://nslds.ed.gov/npas/index.htm and clicking on “Create An FSA ID.” For assistance, call 1-800-557-7394. You can also go to https://studentloans.gov or https://studentaid.ed.gov/FSAID.

Private student loans (that is, those made by a private party that are not federally guaranteed) are not eligible to be consolidated under the Direct Consolidation Loan program.

WARNING: While consolidating federal and private student loans through the Direct Consolidation Loan program is not allowed, it is possible to consolidate federal and private student loans through certain private lenders. In almost all cases, it’s a bad idea to consolidate federal student loans into a private consolidation loan. This is because private consolidation loans do not have all of the benefits of a Direct Consolidation Loan such as deferment, forbearance, cancellation, and affordable repayment plans. 

Consolidating Defaulted Student Loans

It is possible to consolidate under the Direct Consolidation Loan program to get out of default, though there are certain requirements that must be met.

“Default” means failing to repay a loan according to the agreed-upon terms. For most federal student loans, you are in default if you have not made a payment in more than 270 days. (This is different from a “delinquent” loan. When a payment isn’t paid on time, the loan is delinquent.)

A federal student loan in default can be consolidated if:

  • You first make satisfactory repayment arrangements with the loan holder prior to consolidation. (This typically means making three consecutive, voluntary, on-time, full monthly payments before consolidating.)
  • -OR-
  • You agree to repay your Direct Consolidation Loan under the Income-Based Repayment (IBR) Plan, the Pay As You Earn Repayment Plan, or the Income-Contingent Repayment (ICR) Plan.

Income-Based Repayment (IBR) Plan: Under the IBR Plan, the monthly payment amount is generally 15% (or 10% if you are a new borrower) of your discretionary income. (You qualify as a new borrower if you had no outstanding balance on Direct Loan or FFEL program loan when you received a Direct Loan on or after July 1, 2014.)

Pay As You Earn Repayment Plan: Under the Pay As You Earn Repayment Plan, the monthly payment is generally 10% of your discretionary income.

Income-Contingent Repayment (ICR) Plan: Under the ICR Plan, your payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your Direct Loans.

Learn more about each of these types of repayment plans, including eligibility requirements here.

One thing to consider is that collection costs may be added to the total debt amount as part of the consolidation. For example, if a defaulted Direct Loan or FFEL program loan is consolidated, collection costs (up to 18.5% of the outstanding principal and interest amount of the defaulted loan) can be added to the outstanding balance of the loan.

Consolidating any defaulted loans will restore eligibility for new student loans and deferments, among other things.

Consolidating Existing Consolidation Loans

Existing consolidation loans can be consolidated again under some circumstances. (This is called “reconsolidation.”)

For example:

  • An eligible federal student loan (or loans) can be added to a Direct Consolidation Loan within 180 days after the date the consolidation loan is made. (The Direct Consolidation Loan is “made” on the date the first loan being consolidated is paid off.) After the 180-day period expires, you’ll have to apply for a new Direct Consolidation Loan.
  • Consolidating an existing Direct Consolidation Loan or a Federal Consolidation Loan is allowed if you include an additional eligible federal student loan in the consolidation.

An existing Federal Consolidation Loan can be consolidated into a new Direct Consolidation Loan (without including any additional loans) if it is in default (or has been submitted to the guaranty agency by the lender for default aversion) and you want to repay the new Direct Consolidation Loan under the IBR Plan, the Pay As You Earn Repayment Plan, or the ICR Plan.

An existing Federal Consolidation Loan can be consolidated into a Direct Consolidation Loan (without including any additional loans) for the purpose of using the Public Service Loan Forgiveness Program.

Public Service Loan Forgiveness: Under the Public Service Loan Forgiveness (PSLF) Program, the remaining balance on Direct Loans is forgiven after 120 monthly payments under a qualifying repayment plan while working full-time for a certain employer, such as a government organization or a not-for-profit organization.

An existing Federal Consolidation Loan can be consolidated into a Direct Consolidation Loan (without including any additional loans) to take advantage of the limits on interest accrual for active duty military servicemembers. (During periods of qualifying active duty military service, interest does not accrue for up to 60 months on the portion of a Direct Consolidation Loan that repaid a Direct Loan program or FFEL program loan first disbursed on or after October 1, 2008.)

Restrictions on Consolidation

There are some restrictions on loans that can be consolidated.

Private student loans cannot be included in a Direct Consolidation Loan.

Married couples can’t combine their individual loans into in a single, shared Direct Consolidation Loan. (In the past, this was possible. Also, an exiting joint consolidation loan cannot be consolidated under the program.)

A PLUS loan made to the parent of a dependent student cannot be transferred to the student through consolidation. (This means that a student who is applying for loan consolidation cannot include a PLUS loan taken out by a parent in the consolidation.)

If there is a court judgment on a defaulted loan, that loan can’t be included in the consolidation unless the judgment has been vacated.

If there is an order for wage garnishment in place associated with a loan, that loan can’t be included in the consolidation, unless the order has been lifted.

Details About Direct Consolidation Loans

Interest Rate

Direct Consolidation Loans have a fixed interest rate for the life of the loan. The rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. (As a result, the interest rate on a Direct Consolidation Loan could be higher than on some of the previous loans before consolidation, but lower than others.)

There is no cap on the interest rate.

Cost to Consolidate

There is no fee to consolidate federal student loans into a Direct Consolidation Loan.

Warning: Beware of private loan companies that send letters in the mail offering to help consolidate your loans. These companies often use language or images (such as pictures of government buildings or American flags) suggesting that they are affiliated with the federal government. If someone offers to consolidate your federal student loans into the Direct Consolidation Loan program for a fee, you are in all likelihood dealing with a private party and not the U.S. Department of Education. 

When Repayment Begins

With a Direct Consolidation Loan, the repayment period begins immediately after consolidation and the first payment is due in about 60 days after the loan is disbursed (paid out), unless you receive a deferment or forbearance on your loan.

Repayment Term

The repayment term ordinarily ranges from 10 to 30 years, depending on the amount of the consolidation loan, your other education loan debt, and the repayment plan selected.

Repayment Options

There are various repayment options for Direct Consolidation Loans, such as a standard repayment plan, a graduated repayment plan, and an extended repayment plan, as well as the Income-Contingent Repayment (ICR) Plan, the Pay As You Earn Repayment Plan, or an Income-Based Repayment (IBR) Plan, in most cases.

Standard Repayment Plan: Under this plan, payments are made for between 10 and 30 years (not including periods of deferment or forbearance). In most cases, the payment must be at least $50 per month.

Graduated Repayment Plan: Under a Graduated Repayment Plan, payments start out low and increase gradually (usually every two years) over a period of between 10 and 30 years (not including periods of deferment or forbearance).

Extended Repayment Plan: Under this plan, monthly payments are a fixed or graduated amount for up to 25 years (not including periods of deferment or forbearance). Payments are usually lower than payments made under the Standard and Graduated Repayment Plans.

Note: If you are consolidating a Direct PLUS Loan or a Federal PLUS Loan obtained to pay for your child’s undergraduate education, you are not eligible to repay the Direct Consolidation Loan under the IBR Plan or the Pay As You Earn Repayment Plan, though you are eligible to repay the loan under the ICR Plan.

There is no prepayment penalty to pay off a Direct Consolidation Loan early.

Options If You Can’t Make Your Direct Consolidation Loan Payments

Deferment and forbearance are available in certain circumstances. A deferment temporarily allows you to stop making payments on the consolidation loan.

A forbearance allows you to temporarily:

  • stop making payments
  • make reduced payments, or
  • extend the time for making payments.

Advantages and Disadvantages of Direct Consolidation Loans

There are both pros and cons when it comes to consolidating federal student loans.

Upsides to Direct Consolidation Loans

The benefits to Direct Consolidation Loans include the following.

Consolidation may lower the monthly payments by extending the repayment term of the loan up to 30 years.

Consolidation is one potential way to get out of default and get current on defaulted student loans, and also get an affordable monthly payment. (Loans come out of default status as soon as they are consolidated.)

Direct Consolidation Loans have a fixed interest rate. (If interest rates are low, you can lock in a low rate on your student loans by consolidating them.)

Consolidation can make it easier to keep track of your loans since there is just one payment each month, rather than multiple payments. (For most people, this makes it easier to keep tabs on their total student loan balance.)

A repayment option that wasn’t previously available might be available under the Direct Consolidation Loan program.

Loan forgiveness options that were not available under previous loans might be available with a Direct Consolidation Loan. For example, after 25 years of qualifying monthly payments on an IBR or ICR Plan, or 20 years for the Pay As You Earn Repayment Plan (or for new borrowers on the IBR plan), any remaining balance on the loan is forgiven.

Consolidated loans are eligible for the Public Service Loan Forgiveness (PSLF) program. (This means that federal loans originated under the FFEL program or the Perkins loan program may be consolidated into a new Direct Consolidation Loan to qualify for PSLF. Otherwise these loans are not eligible for the PSLF program.)

Downsides to Direct Consolidation Loans

The following are a few potential disadvantages when it comes to consolidating federal student loans under the Direct Consolidation Loan program.

Consolidation will extend the repayment term (that is, how long it takes to pay off the loan), which often lowers the monthly payments. However, by extending the length of time to repay the loan, this will increase the total amount you have to pay because you will pay more interest over the life of the loan. If you have almost paid off your student loans, it may not be worth it to consolidate.

In some cases, the interest rate might actually go up on lower rate loans since the rate is based on the weighted average of loans being consolidated, rounded up to the nearest one-eighth of one percent.

Direct Consolidation Loans don’t have a grace period. The repayment period begins immediately upon consolidation and the first payment will be due in about 60 days. (The processing of the Direct Consolidation Loan can be delayed until the end of a grace period by making this selection in the application.)

Consolidation will not immediately help your credit if your loans were in default since your credit report will still show this information. On the other hand, if your payments are affordable after consolidation and you continue to make the payments on time, your credit score will start to improve.

Any payments made on the consolidated loan will not count towards the number of years of qualifying repayment required for loan forgiveness under the IBR Plan, the Pay As You Earn Repayment Plan, or the ICR Plan; or towards the 120 qualifying payments required for Public Service Loan Forgiveness.

Loan Forgiveness Under the IBR, Pay As You Earn, and ICR Plans

IBR Plan: If you have not paid back your loan in full after making the equivalent of 25 years of qualifying monthly payments (20 years for new borrowers), any outstanding balance on the loan is forgiven.

Pay As You Earn Repayment Plan: If you have not paid back your loan in full after you made the equivalent of 20 years of qualifying monthly payments, any outstanding balance on the loan is forgiven.

ICR Plan: If you have not paid back your loan after making the equivalent of 25 years of qualifying monthly payments, the unpaid portion is forgiven.

Consolidating federal student loans into a Direct Consolidation Loan could cause the loss of other benefits, such as reduced interest rates or repayment incentive programs that are available under the loans being consolidated. (For example, including a Perkins Loan in a consolidation will cause the loss of certain cancellation benefits that are only available in that program.)

Warning to military servicemembers: Military servicemembers on active duty are eligible for an interest rate reduction to 6% under the Servicemembers Civil Relief Act for all federal (and private) student loans taken out before service. If you consolidate your loans while you’re serving in the military, you won’t qualify for this benefit. 

How to Apply for a Direct Consolidation Loan

All borrowers, including those in default, must apply either:

  • online
  • by downloading an application and mailing it to the selected consolidation servicer. A copy can be downloaded here.

Regular student loan payments should be made until the previous loans are paid in full as a result of the consolidation.

Contact Information

To obtain further information about Direct Consolidation Loans before submitting an application, contact the Loan Consolidation Information Call Center at 1-800-557-7392.

After submitting an application, contact the consolidation servicer if you have any questions. (The loan servicer is the company that processes the payments, among other things, on a federal student loan. You’ll choose a servicer as part of the application process.)

Where to Learn More About Federal Student Loans

The U.S. Department of Education and the Consumer Financial Protection Bureau provide information about Direct Consolidation Loans, along with general information about student loans and how to repay them.