How the Federal Direct Consolidation Loan Program Works

Calendar Icon Updated January 15, 2019
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Under the federal Direct Consolidation Loan program, you can combine (consolidate) all or some of your various federal student loans into one new loan. It is also possible to consolidate just one federal student loan. (Basically, you refinance the loan or loans into a federal Direct Consolidation Loan.)

Where Direct Consolidation Loans Come From

This type of federal student loan is made by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program.

Eligibility Requirements for Direct Consolidation Loans

Most federal student loans can be consolidated into a Direct Consolidation Loan.

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To consolidate, you must have at least one Direct Loan or Federal Family Education Loan (FFEL) program loan that is either in a grace period or a repayment period. (A grace period is the time frame following your graduation, after you leave school, or drop below half-time enrollment when you don’t have to make payments on various federal student loans.)

Loans that are in a forbearance or deferment period are considered to be in repayment status.

Interest Rate for Direct Consolidation Loans

A Direct Consolidation Loan will have a fixed interest rate for its entire repayment term. The rate is based on the weighted average of the interest rates for the consolidated loans, rounded up to the nearest 1/8 of a percent. This means that the interest rate on a Direct Consolidation Loan will likely be higher than it was on some of your prior loans before they were consolidated, but lower than others.

Repayment Options for a Direct Consolidation Loan

Direct Consolidation Loans have several repayment options, including repayments plans that are based on your income. If you choose a repayment option and later change your mind, switching to a different plan later on is usually possible.

Why Consolidating Your Loans Under This Program Might Be a Good Idea

Once you consolidate your federal student loans into a Direct Consolidation Loan, you only have to make one monthly student loan payment. For a lot of people, this is easier than making multiple payments to different lenders each month. Plus, the new monthly payment amount that you have to pay might be less than the combined payments you previously paid each month.

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I acknowledge and understand that by submitting this Contact Request form through clicking "Check Eligibility!", I provide my express consent to the following: (1) That I am bound by Eligibility.com LLC’s Privacy Policy and Terms of Use; (2) That I am not required to submit this form, and thereby agree to all terms located herein, as a condition to receive any property, goods, or services that may be offered, and that I may revoke my consent at any time.

When Consolidating Your Loans Under This Program Might Not Be a Good Idea

If you consolidate certain federal student loans, you might lose some benefits—such as a reduced interest rate, repayment incentive programs, or other benefits that are available under the loans that you’re consolidating. For example, if you include a Perkins Loan in a Direct Consolidation Loan, you’ll lose cancellation opportunities that are only available as part of that program.

Eligibility Team

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