About Federal Loan Consolidation

Federal Loan Consolidation is the Department of Education’s program for refinancing Federal Student Loans. Consolidation loans can simplify your loan repayment and fix your interest rate for the life of the loan. Federal loans include Subsidized Stafford Loans, Unsubsidized Stafford Loans, William D. Ford Direct Loans, Perkins Loans, and Graduate Plus Loans. If you are interested in consolidating your loans, you must consolidate in the federal government's Direct Loan Program.

You may consolidate online at studentaid.ed.gov/sa/.

Consolidation loans have the longest repayment periods permitted by law. These repayment periods extend from ten to thirty years. Repayment may be based on fixed, graduated or income-contingent schedules, depending on the kind of consolidation program chosen. There is never a penalty for prepayment.

Loan Deferment

Under certain circumstances — such as continued study, disability and unemployment — students can postpone payments on their consolidation loans by requesting deferment. Similar to the Stafford loan program, during a deferment, the Federal Government pays the interest that accrues on the portion of your consolidation loan that would have been eligible for an interest subsidy if you had not consolidated. Interest will continue to accrue on the portion of your consolidation loan that was not eligible for an interest subsidy during deferment. Consolidation borrowers are responsible for interest that accrues during deferments.

Loan Forgiveness

If you are planning a career in the Public Interest, or in any other field that is eligible for forgiveness of federal loans after 10 years of payments, you must consolidate your federal loans (Stafford Loans, Graduates Plus Loans). Only loans in the Direct Loan program are eligible for loan forgiveness under the College Cost Reduction and Access Act of 2007. You may consolidate online at studentaid.ed.gov/sa/. You may be eligible for income-based repayments (IBR), which will significantly reduce your monthly payments.

Consolidating Your Perkins Loan

Before you decide to consolidate your federal Perkins Loan(s) with your Stafford Loans you need to understand that by consolidating your Perkins Loan you will lose the right to Perkins loan forgiveness. The US Department of Education may forgive Perkins loans over a five-year period if you are employed in qualifying employment: teaching, law enforcement, military and certain Public Interest careers. Recently, a court decision to grant Perkins Loan Forgiveness to lawyers working in the Public Interest brought this unique opportunity to light. If you are employed, or think you might be employed in a field that makes you eligible for Perkins Loan Forgiveness, you should not consolidate your Perkins Loan. If you consolidate it, you will forfeit your right to loan forgiveness provisions.