Student Loan Consolidation: Federal Student Loans, Private Student Loans

Learn about federal Direct Consolidation Loans and more.

Consolidating your student loans is when you combine multiple debts into a single loan. With a federal Direct Consolidation Loan, you can consolidate all, some, or one of your federal student loans. By consolidating these loans, you might get access to more repayment options and forgiveness programs, as well as perhaps lower your monthly payments. Consolidation is also a good way to get out of default on your student loans.

Private student loans, though, don’t qualify for consolidation under the federal Direct Consolidation Loan program. Also, if you consolidate your federal student loans into a private loan—rather than a Direct Consolidation Loan—you'll lose important benefits.

Read on to get the lowdown on federal Direct Consolidation Loans and find out why you should probably avoid private consolidation loans.

Federal Direct Consolidation Loans: The Lowdown

A Direct Consolidation Loan from the federal government allows you to combine your federal student loans into a single loan with one monthly payment. Here’s what you need to know about this kind of loan in a nutshell.

Repayment Options

Direct Consolidation Loans come with flexible repayment options, including a standard repayment plan, a graduated repayment plan, and an extended repayment plan, and in most circumstances an Income-Contingent Repayment (ICR) Plan, the Pay As You Earn Repayment Plan (PAYE), Revised Pay As You Earn Repayment Plan (REPAYE), and an Income-Based Repayment (IBR) Plan. (Learn about Student Loan Repayment Plans.)

Getting Out of Default

One way to get out of default is with a Direct Consolidation Loan. In order to get out of default through a Direct Consolidation Loan, you must make satisfactory repayment arrangements—specifically, three consecutive monthly payments—on the loan first or agree to repay your new Direct Consolidation Loan under IBR, PAYE, REPAYE, or ICR.

If you have a defaulted loan that’s currently being collected through a garnishment of your wages, or in accordance with a court order after a judgment, you can’t consolidate the loan unless the wage garnishment order is lifted or the judgment vacated.


The vast majority of federal loans are eligible for consolidation, including subsidized and unsubsidized Stafford loans, Direct loans, Federal Perkins Loans, Nursing Student Loans, and more. (For a complete list, go to go to the U.S. Department of Education’s Federal Student Aid website.) Borrowers with these kinds of loans are eligible to consolidate after they graduate, leave school, or drop below half-time enrollment.

Interest Rate

The interest rate is fixed for the life of the loan. The rate is calculated based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. So, the interest rate on your new Direct Consolidation Loan might be higher or lower than the interest on your loans before consolidation.

Cost to Consolidate

You don’t have to pay a fee to consolidate your federal student loans into a Direct Consolidation Loan.

Repayment Term

The repayment term on a Direct Consolidation Loan is up to 30 years, and depends on the amount of the consolidation loan, your other student loan debts, and the repayment plan you pick. You start repaying the loan 60 days after the loan gets disbursed. (Though, if any of the loans you want to consolidate are still in the grace period, you can delay the processing of a Direct Consolidation Loan until the end of a grace period if you make this selection in the application.)

Because the repayment term is extended up to 30 years, you might be able to lower your monthly payments through a Direct Consolidation Loan.


Private student loans cannot be included in a federal consolidation loan. In addition, spouses cannot consolidate their loans into a single consolidation loan. And, as noted earlier in this article, borrowers who are in default must meet certain requirements before they can consolidate.


The circumstances under which you can consolidate a loan or loans that have already been consolidated are limited.

Consolidating Federal Student Loans Into a Private Loan

Banks and private lenders tend to encourage people to consolidate their federal student loans into a private consolidation loan—or to combine both federal and private student loans into a new, private consolidation loan—by promising “one low easy payment.” But consolidating your federal loans into a private loan is rarely a good idea. Here's why:

  • It is extremely unlikely that a private consolidation loan will have better terms than your federal student loans.
  • In past years, federal student loans had variable interest rates, and a private consolidation loan could lock in a fixed rate. But since 2006, all federal student loans have a fixed interest rate, so there is no added benefit in getting a fixed rate with a private consolidation loan.
  • Converting federal student loans into private consolidation loans means all federal repayment plans—as well as forbearance, deferment, and cancellation options—are lost forever.

Be on the lookout for private lenders that mail solicitations offering to consolidate your federal student loans. The solicitation might use official-sounding language or government-related images, like a government building or the American flag, which suggest the lender is affiliated with the federal government. But only the U.S. Department of Education offers federal Direct Consolidation Loans.

How to Apply

To learn more about Direct Consolidation Loans, go to the U.S. Department of Education’s Federal Student Aid website. To apply, go to

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