Loan Consolidation

Loan consolidation is a method of refinancing federal educational loans. In a loan consolidation, the loans included in consolidation are repaid in full with a new loan. The new loan is then payable according to the terms of the new loan, generally with a longer repayment period. There are two programs you can use to consolidate your loans—Federal Direct Loan Consolidation (provided by the federal government) or Federal Loan Consolidation (through various private banks and lenders). Each program has advantages and disadvantages to you depending on your particular situation. The chart below compares these two programs to help you decide which route is the best for you.

Federal student loans that may be included in loan consolidation are:

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
Parent Loans for Undergraduate Students (PLUS)
Direct PLUS Loans
Direct PLUS Consolidation Loans

Federal Unsubsidized Stafford Loans
Federal Supplemental Loans for Students (SLS)
Federal Consolidation Loans
Direct Unsubsidized Loans
Direct Unsubsidized Consolidation Loans
Auxiliary Loans to Assist Students (ALAS)
Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDS) made under subpart II of part A of title VII of the Public Health Service Act.
Health Education Assistance Loans (HEAL)*
Nursing loans made under subpart II of part B of title VIII of the Public Health Service Act

*Note: HEALs can be refinanced without consolidation through HEAL refinancing to retain all HEAL benefits.

Consolidation FAQs

QUESTIONS	FEDERAL DIRECT LOAN CONSOLIDATION (Provided by the Federal Government)	FEDERAL LOAN CONSOLIDATION (Provided by banks and other private lenders)
Who qualifies for consolidation loans?	Borrowers with at least one direct loan and students whose lender will not offer an acceptable Income Sensitive Repayment plan.	Borrowers with at least one loan.
Why would I consolidate my educational loans?	To reduce monthly payments by spreading out repayment over a longer period or lower minimum monthly payment. To have one payment instead of several each month. To have one servicer to work with for deferments and other benefits. To lock in a fixed lower interest rate on variable rate loans. Note: Stafford loans can be serialized without consolidating for single source billing.
What are the drawbacks?	Variable interest loans will not benefit from further interest reductions. Lose some cancellation privileges of Perkins loans such as teaching in economic hardship areas. If payments are extended, amount paid in interest will increase over the repayment period of the loan. May lose grace period, deferment and cancellation provisions for some loans.
When can I consolidate my loans?	In school, if borrower has a direct loan or attends a direct loan school In grace period In repayment Note: Stafford interest rates on loans are 0.6% lower if consolidated before the repayment period begins.	In grace period In repayment Note: Stafford interest rates on loans are 0.6% lower if consolidated before the repayment period begins.
Where can I consolidate my loans?	If all your loans are from a single private lender, you must first check with that lender to see if they will provide an acceptable income-sensitive repayment plan. Otherwise, you can consolidate with Direct Loans.	If all your loans are from a single lender, you must check first with that lender to see if they will provide an acceptable income-sensitive repayment plan. Otherwise, you may apply with any lender.
Can I reconsolidate a single consolidation loan?	Yes	No
What types of repayments are possible?	Standard Extended Graduated Income contingent Alternative	Standard Extended Graduated Income Sensitive
What interest will be charged?	Weighted average of all loans included in consolidation rounded to the nearest higher one-eighth percent capped at 8.25%, 9% if PLUS.	Weighted average of all non-HEAL loans rounded to the nearest higher one-eighth percent capped at 8.25%, 9% if PLUS, and HEAL loans at special refinance rate.
Do I consolidate my subsidized and unsubsidized and PLUS loans separately?	No. Your consolidation loan will be split into a subsidized portion that incorporates all the subsidized loans, an unsubsidized portion, and PLUS portion if applicable.
Will my consolidation loan have a Grace Period?	If the consolidation includes a loan for which the student holds in-school status.	No
Can I consolidate a defaulted loan?	Yes, but repayment plan will be Income contingent unless other conditions are met.	No, unless the loan is rehabilitated.
Can married borrowers consolidate their loans together?	Yes, but because of the additional provisions below, couples should carefully consider joint consolidation and may want to consolidate their loans separately.
Are there additional provisions for spousal consolidation loans?	Yes. Each spouse is equally and severally liable for the loan and both spouses must qualify for deferment, forbearance or discharge (such as due to the death of the borrower)
Can the loan be canceled upon borrowers death or total disability?	Yes
What happens to the grace, period on my loans?	You lose any remaining months of grace if you consolidate during the grace period of the loans. You retain a 6-month grace period if you consolidate with in-school status.	You lose any remaining months of grace if you consolidate during the grace period of the loans.
What about in school deferments?	In-school deferment is available.
What about the economic hardship deferment?	Up to three years.	Remaining portion of the three-year economic hardship deferment.
What about unemployment deferments?	Up to 3 years.
What about deferments for an approved graduate fellowship or rehab program?	Yes
What about the interest-free subsidy during deferments?	Perkins Loans remain interest free during deferment. You lose Perkins cancellation provisions for teaching, public or military service. HEAL, Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDS) lose their interest free status when consolidated even in deferment.	Perkins Loans lose their interest free status during deferment. You also lose cancellation provisions for teaching, public or military service. HEAL, Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDSL) lose their interest free status when consolidated even in deferment.
Are there other deferments or forbearance provisions that carry over from loans taken before 7/1/93?	Mandatory forbearance for medical residents. Up to two years for Internship/Residency if all Staffords were included. Up to three years for teaching in a designated shortage area. Up to three years while serving in Armed Forces, Peace Corps, Public Health Service, ACTION or full-time volunteer for a tax-exempt organization Up to three years for active duty in NOAA corps. Up to 6 months for qualifying parental leave. Up to 1 year as a working mother.	Mandatory forbearance for medical residence.

Disclaimer: Every effort has been made to provide accurate information. However, this table is compiled from a variety of sources. Please consult your potential loan consolidator to verify any loan provisions and confirm benefits that may affect your loans.

Finances Student Loans