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Consolidating Federal Loans — FAQs
Frequently Asked Questions about Student Loan Consolidation — Direct
I have a Direct Consolidation Loan and want to go back to school on at least a half-time basis. Will I be required to make payments on my Direct Consolidation Loan while in school?
No. If your Direct Consolidation Loan servicer (an entity that services Direct loans on behalf of ED) receives information from your school that you are enrolled once again on at least a half-time basis, or receives your request for an in-school deferment, your servicer will put your Consolidation loan into an in-school deferment status. You will not be required to make payments on your Consolidation loan until you drop to less-than-half-time enrollment or graduate. Of course, you can always make loan payments while you are in school. Every payment made can potentially reduce the amount of interest that accrues on your Consolidation loan.
Keep in mind that you will not receive a grace period on your Consolidation loan and you will enter repayment within 60 days after you drop to less-than-half-time enrollment or graduate.
However, if you take out additional Direct subsidized and/or Direct unsubsidized loans while you are back in school, you will be eligible for a grace period on those loans after you drop to less-than-half-time enrollment or graduate
I have a Direct Consolidation Loan. Am I entitled to the same deferments that I had with my Direct subsidized and Direct unsubsidized loans?
Consolidation loans have most of the same deferments that Direct subsidized and Direct unsubsidized loans have. You lose a few deferment options upon consolidation, but the ones most frequently used by borrowers (the in-school deferment, unemployment deferment, and economic hardship deferment) are still available for a Consolidation loan.
I am having difficulty making my Direct Consolidation Loan monthly payment, but I do not qualify for a deferment. Am I eligible for forbearance?
Direct Consolidation Loan borrowers remain eligible for forbearance. Forbearance provisions for consolidation loan borrowers are the same as those for Direct subsidized, Direct unsubsidized, PLUS, and SLS loan borrowers. Contact your ED servicer for more information about forbearance options.
Can I consolidate during a period of deferment?
Yes, you can consolidate during a period of deferment, and, in some cases, this may allow you to obtain a lower Consolidation loan interest rate. If you have variable-rate Stafford and/or Direct loans that were first disbursed before July 1, 2006, the interest rate on those loans actually has two levels. The interest rate is lower when you are in school, in your grace period (the six months after you leave school before you have to start paying back your loans), and in periods of deferment. The interest rate is higher when you are in repayment. So, if you consolidate a variable-rate Stafford or Direct loan while you are in a period of deferment, the interest rate on that loan can be up to 0.6% lower, which will have a positive effect on the calculation of your Consolidation loan interest rate.
If you consolidate during an in-school deferment, keep in mind that you can only include loans that have been fully disbursed in your Consolidation loan. So any future loans that you intend to take out while continuing your education will have to be repaid separately, which may somewhat complicate your repayment process.
I have decided to consolidate my FFELP student loans into a Direct Consolidation loan. I am currently trying to compile a list of all of my loan holders. Where can I find this information?
You can view a list of all of your federal education loans by going to the National Student Loan Data System (NSLDS) website. To access your data you must enter your Social Security Number, the first two letters of your last name, your date of birth, and the FSA ID that you received from the U.S. Department of Education.
Underlying Loan Issues
Is there a minimum balance required to get a Direct Consolidation Loan?
No, there is no minimum balance required to get a Direct Consolidation Loan.
I have a PLUS loan and a Direct loan. Can I consolidate these together?
Yes, as long as you are the borrower of both loans, you can include both of them in a Direct Consolidation Loan. As a matter of fact, you can consolidate any of the following types of loans into a Direct Consolidation Loan:
- FFELP loans (Stafford, PLUS, SLS, and prior Consolidation loans)
- FDLP, or Direct, loans (Direct subsidized, Direct unsubsidized, PLUS, and prior Consolidation loans)
- FISL loans
- Perkins Loans (formerly National Student Defense Loans)
- Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS)
- Nursing Student Loans (NSL)
- Health Education Assistance Loans (HEAL)
Note: if you consolidate a parent PLUS loan with the other loans listed above, the resulting consolidation loan is not eligible for repayment under the Income-Based Repayment Plan.
Can I consolidate private education loans with federal student loans? If so, are the interest rates the same as those for federal loans?
Private, or alternative, loans cannot be consolidated into a Direct Consolidation Loan. However, if you do decide to take out a Direct Consolidation Loan, your Direct Loan servicer will consider your total education loan debt when determining the maximum length of your repayment period under the Consolidation loan. Access the Direct Consolidation Loans website for more information about this.
I have a Perkins loan in addition to my Stafford and/or Direct loan. Should I consolidate these together?
It's your decision, but make sure you think it out before taking this step.
One factor to keep in mind is that Perkins loans may lose certain borrower benefits if they are included in a Consolidation loan. For example, you may lose certain loan cancellation or deferment benefits. Talk to your school (the holder of your Perkins loan) for more information.
Do I lose any borrower benefits on my Direct subsidized and Direct unsubsidized loans if I consolidate?
Consolidation loans do not have all of the deferments that Direct subsidized and Direct unsubsidized loans do. However, the deferment options most frequently used by borrowers (the in-school deferment, unemployment deferment, and economic hardship deferment) are also available for Consolidation loans.
I have a high loan balance and I know that if I consolidate, I have the option to extend my repayment period to lower my monthly payment. Are there any disadvantages to doing this?
Yes. One very noteworthy disadvantage to extending your repayment period is that you will pay more interest over the life of your Consolidation loan. As a matter of fact, this choice may cause you to pay a significantly higher amount of interest on your loan over the additional years of repayment.
So it's important not to be tempted to take a longer repayment period if you can afford the monthly payments at the shorter repayment period. You'll save more money in the long run. [Examples are provided at "Lower payments, larger payout — is it worth it?"]
I know that I will wind up paying more interest over the life of my loan, but I really need to lengthen my repayment period so that I can reduce my monthly payments. If I consolidate, how long can I take to pay off my loan?
The maximum length of your repayment period depends on the balance of your Consolidation loan and any other education loans you may have. It can go from 10 years to 30 years depending on your balance. Your lender can tell you the maximum repayment period you are allowed based on your balance, but remember, you don't have to take that long to repay your loan. You can decide to take less time than the maximum, and doing so will save you at least some of the interest you will add to your balance by lengthening your repayment period.
Can I prepay my Direct Consolidation Loan at any time?
Yes, you can prepay your Direct Consolidation Loan at any time without penalty, just like any other Direct loan. As a matter of fact, it is always smart to pay extra on your loan's principal whenever possible, because this will reduce the amount of interest you pay over the life of your loan. Contact your Direct Loan servicer for more information about prepayment.
I am having difficulty making my Direct Consolidation Loan monthly payment. Is there another repayment plan available?
The Income-Based Repayment (IBR) plan may be an option. IBR is an alternative student loan repayment plan available for FFELP and FDLP borrowers. Unlike other repayment plans, which may require a one-size-fits-all payment amount, IBR establishes a monthly payment that looks at your unique situation by considering your income, family size, and federal student loan debt.
For more information, contact TG customer assistance at (800) 845-6267.
If I already have a FFELP Consolidation Loan, can I reconsolidate into a Direct Consolidation Loan?
A FFELP Consolidation Loan borrower may consolidate that loan into an Direct Consolidation Loan for purposes of:
- Obtaining the benefit of public service loan forgiveness.
- Seeking an income-contingent repayment (ICR) or Income-Based Repayment (IBR) plan if the borrower's loan holder has requested default aversion assistance from the guarantor.
- Seeking an ICR or IBR plan if the borrower has filed an adversary complaint in a bankruptcy proceeding.
For more information, contact TG customer assistance at (800) 845-6267.
Do I have to pay a fee to consolidate?
No. Unlike the Federal Direct Subsidized, Federal Direct Unsubsidized, and PLUS Loan Programs which each have a loan fee, a borrower does not have to pay a fee to consolidate.
What questions should I ask the Direct Loan servicer if I am considering consolidation?
It's a good idea to ask the servicer to figure out what your monthly payment will be if you consolidate and how long it will take to pay the total loan balance. If the servicer offers you an extended repayment period so that you can have a lower monthly payment, be sure you weigh that option carefully. A lower monthly payment may seem very appealing, but it may also cause you to pay a lot more in interest over the life of your Consolidation loan.
You might also ask the Direct Loan servicer to help you figure out if you should include all of your eligible student loans in a Direct Consolidation Loan. There may be advantages or disadvantages to consolidating certain loans.
Is it ever financially unwise to consolidate?
Generally, it's not a good idea to consolidate if the interest rate you will pay on your Consolidation loan is higher than the rate you are paying on your current loan(s). This may happen in cases when the Consolidation loan interest rate has been rounded to the nearest one-eighth of a percent (as required) and the resulting rate is higher than the rate on the underlying loans being consolidated.
Who can help me decide if consolidation is right for me?
You can contact the Direct Loan servicer or your school financial aid office for more information about consolidation.
You can also "do the math" yourself! If you have multiple student loans at different interest rates and want to know what the interest rate will be for a Consolidation loan, TG's Consolidation Calculator can help you make that determination. The calculator also allows you to find out what your monthly payments might be.
In addition, TG's customer assistance team is available to help — just call toll-free: (800) 845-6267.