How to Consolidate Federal Student Loans

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Christy Rakoczy

By Christy Rakoczy

March 12, 2020


If you have federal student loans, you may want to consider a Direct Consolidation Loan. This is a loan from the Department of Education that you use to repay one or more existing educational debts. most federal loans are eligible including Perkins Loans, Stafford Loans, FFEL Loans and Direct Loans. 

Pros of Consolidating Federal Student Loans 

  • Consolidate multiple loans to one – to combine multiple loans to make repayment easier
  • Gain access to repayment plans with a longer timeline. A Direct Consolidation Loan could be paid off over as long as 30 years.
  • Parent PLUS Loans become eligible for an income-driven payment plan and Public Service Loan Forgiveness after consolidating, when otherwise neither is an option.
  • For eligible loans, consolidation is free, the process is simple, and it can be done entirely online.

Cons of Consolidating Federal Student Loans

  • Consolidating doesn’t lower your interest rate as it does with refinancing student loans. Your new loan will have a rate determined by a weighted average of the rates of the loans you paid off.
  • If you are currently on an income-driven repayment plan and consolidate, this will reset your qualifying payments made towards potential loan forgiveness. So regardless if you’ve made on-time payments for the last year, consolidation will put your tally at zero.
  • You can’t include any private loans in your consolidation. For private loans, you can consider the pros and cons of private loan refinance.

How to Consolidate Federal Student Loans 

1. Create (or sign into) your account at Federal Student Aid. 

To consolidate, you’ll need to log into the Federal Student Aid website using your FSA user name, email, or mobile phone number and password. If you don’t have a FSA ID, you’ll have to create one. If you’ve forgotten your username or password, there are links on the page to help you recover them. 

2. Complete your Direct Consolidation Loan Application and Promissory note

This requires you to enter:

  • Your full name and any former names
  • Your Social Security number
  • Your date of birth
  • Your permanent address, a telephone number where you can be reached, and your email address if you wish to be contacted via email
  • Your driver’s license information
  • Your employer’s name, address, and phone number
  • Contact details for two adult references who have known you for at least three years
  • Details on the loans you wish to consolidate, including loan codes, contact details from your loan servicer, the loan account number for each loan, and the estimated amount you’ll need to repay the loan
  • Information about loans you don’t want to include in your consolidation loan
  • A selection of which repayment plan you want

You will also need to review the Borrowing Understandings, Certifications, and Authorizations and will have to sign and date the Promise to Pay, which serves as your promissory note.

If any of the loans you are consolidating are in your grace period and you don’t want your consolidation loan processed until the grace period ends and payment comes due, you’ll need to provide the month and date that it ends. If you do provide this, your application won’t be processed until the end of your grace period is within a month or two. Your loans won’t actually be consolidated until it has come to an end. 

3. Mail in your required forms and wait for your existing loans to be repaid

After completing your Direct Consolidation Loan Application, you must mail in original copies of pages one through five as well as your signed promissory note. You must submit these forms for your application to be processed. The address will be provided when you complete your application.

After you’ve mailed in your forms, the Department of Education will contact you if they have any questions. They will also send you a notice before actually paying off your student loans. This will include a deadline, and you’ll have to contact them by that deadline if you change your mind about going forward with the consolidation.

You should not stop paying your current student loan servicer until your consolidation loan has been completed and you receive written notification that it’s time to begin paying your Direct Consolidation Loan. 

Tips for Success

If you complete this process, you should be able to successfully consolidate your federal student loans. It takes just a short time to finish the application online, especially if you know what federal loans you have. If you aren’t certain what you owe or who your servicer is, the National Student Loan Data System can help you determine that so you can make consolidation simple.

Other Options for Managing Student Loans

Refinancing student loans into a private loan is an option if you have private loans that don’t qualify for federal loan consolidation. It’s also an option to potentially get a lower interest rate. However, keep in mind that refinancing federal loans into a private loan means you’ll lose many perks that are only offered with federal student loans. These include the ability to be on an income-driven repayment plan, the possibility to have student loans forgiven, and generous deferment periods (where you can pause payments) in times of economic hardship and unemployment. 


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