Federal Loan Consolidation

Many federal student loans are eligible to be consolidated into a consolidation loan, including Direct Subsidized and Unsubsidized loans, PLUS loans, Federal Perkins loans, Federal Nursing Loans and others. There are several benefits to federal loan consolidation. By consolidating a federal student loan, you may be able to reduce the interest rate and payment to help you get out of debt faster.

No Cost for Federal Loan Consolidation

There is no application fee for federal loan consolidation and nearly everyone with a federal student loan that is either in a grace period or repayment period can qualify. By consolidating, you can set up the same payment plan for all of your loans. The consolidation loan will pay off all of your other loans and combine them into one, easy-to-manage loan. Your interest rate will remain reasonable. Interest will not exceed 8.25 percent and is the weighted average of all loans being consolidated.

You may even be able to consolidate your loans if you are in default. The only additional requirement for defaulted loans is that repayment arrangements with the original loan servicer or you agree to use one of the income-based repayment plans for your consolidation loan. Income-based payment plans ensure that you are able to afford your monthly payments so that you don’t get into deeper debt after you consolidate your student loans.

Federal loan consolidation is often an effective way to organize student loans and make one convenient monthly payment. Consolidation loans may be particularly beneficial if you have variable interest rate loans. You can consolidate your variable rate loans into one loan with a fixed rate of interest. Fixed rate loans make planning your monthly and yearly budget easier because they payment will be the same for the life of the loan.

When you decide to use federal loan consolidation to reduce your debt, it is important to have a plan to repay all of your debts. You may choose to prioritize your debts by paying off those with the highest interest rate first. In that case, it may be beneficial to extend the payments on your student loan and increase your payments after your high-interest debt is paid off.