Consolidate Federal Student Loans | Federal Student Loan Consolidation

Students that have either a Federal Family Education Loan, also known as FFEL and/or a Direct Student Loan qualify for a federal loan consolidation.

Under these programs, a borrower’s loans are paid off and a new consolidation loan is created. These programs simplify loan repayment by combining several types of Federal education loans, which may have different terms and repayment schedules or may have been made by different lenders, into one new loan. When borrowers complete a federal student loan consolidation, the interest rate may be lower than one or more of the underlying loans.  The monthly payment amount on a consolidation loan is usually lower and the amount of time to repay may be extended beyond what was available in the separate loan programs.

These features should result in a more manageable debt load and should make borrowers less prone to default.Consolidating federal student loans allow borrowers to combine different types of federal student loans to simplify repayment.  Even if you have just one loan, you can also choose to consolidate it.

A FFEL Consolidation Loan is designed to help student and parent borrowers consolidate several types of federal student loans with various repayment schedules into one loan. With a FFEL Consolidation Loan, borrowers will make only one payment a month. Under this program, the consolidation loan will be made by a commercial lender, credit bureaus will be notified that your account has a zero balance, and you will sign a new promissory note that will establish a new interest rate and repayment schedule.

All FFEL and Direct Stafford Loan borrowers are eligible to consolidate after they graduate, leave school, or drop below half-time enrollment. To receive a FFEL Consolidation Loan, you must be in repayment on your defaulted loan, which is three voluntary, on-time, full monthly payments. Depending on the balance due, the repayment period may extend up to 30 years.

If you owe no other delinquent or defaulted debts to the United States, you will again be eligible for other federal funds, including FHA loans, VA loans, and Title IV student financial aid funds.Borrowers should keep in mind that although consolidation can simplify loan repayment and lower your monthly payment, it also can significantly increase the total cost of repaying your loans. If you don't need monthly payment relief, you should compare the cost of repaying your unconsolidated loans against the cost of repaying a consolidation loan. You also should take into account the impact of losing any borrower benefits offered under non-consolidated repayment plans.

Borrower benefits, which may include interest rate discounts, principal rebates, or some loan cancellation benefits, can significantly reduce the cost of repaying your loans.