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What is a Federal Consolidation Loan?

A current or prior student with outstanding student loans may choose to refinance those with loans with a Consolidation Loan. The primary benefit of a Consolidation Loan is that it combines existing variable-rate loans into one fixed-rate loan. By locking in a low interest rate now, you may be able to save substantial interest if student loan rates climb in the future. The interest rate on a Federal Consolidation Loan is based on the weighted-average interest rate on loans being consolidated, rounded to the next highest one-eighth percent, not to exceed 8.25%. You will also extend the repayment period, thus lowering your monthly loan payment.

Parents may also seek to combine existing PLUS Loans into a PLUS Consolidation Loan.

Federal Consolidation Loans are offered directly from the government (Direct Consolidation Loans). Information about Direct Consolidation Loans may be obtained from the school financial aid office for those students still in school, or from the Federal Direct Consolidation Loans Information Center.


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