Direct Loan Consolidation

Direct loan consolidation is a fixed-rate refinancing program that combines all of your existing federal student loans into one master loan. Consolidation is a great tool for managing your finances; it provides immediate payment relief and long term benefits.

  • Cut your monthly student loan payment (in some cases up to 52%)
  • Simplify your finances with one monthly payment
  • No credit checks, fees, or application charges
  • Improve your credit from the payoff & consolidation process

Direct consolidation loans can be created from all forms of federal student loans, including: Stafford loans, Perkins loans and Graduate PLUS loan. Parents or legal guardians who borrow Parent PLUS loans can also consolidate under the Federal Direct Loan Program (FDLP) and gain the benefits. There is no maximum or minimum dollar value required for federal direct loan consolidation.

How Direct Student Loan Consolidation Works

Direct loan consolidation is facilitated through the United States Department of Education. Essentially, you provide the account information for each of your federal student loans and they are all pooled together. Currently, the interest rate for federal consolidation loans is based on the weighted average of your loans + 0.25%.

Aside from lowering your monthly payments, the other fringe benefit of applying for loan consolidation is an immediate boost to your credit score. This happens because your existing loans are effectively being paid off; the computer that maintains your credit history and score sees this action as a positive indicator of your financial strength and adjusts your score accordingly.

Direct Loan Consolidation Payment Relief

One of the key benefits of consolidating your federal school loans is payment relief. By combining all of your student loans into one consolidated loan, you can lengthen your repayment term from the standard 10 years to up to 30 years, depending on the amount of your education debts.

With a lower monthly payment, you'll have more money available to meet other living expenses, including car payments, housing expenses, and career-related necessities. Because there are no penalties for overpayment, you can make larger payments and reduce your repayment term when it becomes affordable. Learn more about how student loan consolidation works in this step-by-step tutorial.

Managing Existing Student Loan Debt Obligations:

  • If you're having trouble meeting your student loan payments, contact your loan servicer. You may qualify for a deferment, forbearance, or repayment alternative that is more affordable.
  • Consolidation can help by extending your loan's repayment term beyond the standard ten years. While this will increase the total interest charges, the monthly payments will become more manageable.
  • Watch your expenses! Just as you need to be cautious when you're in school, you need to be aware of your expenses after you leave school.
  • Limit credit card usage to absolute necessities. Remember you'll pay more for every charged item because of the credit card's finance charges.
  • If you must have student credit cards, shop around for low interest rates or call existing credit card providers and ask them for a lower rate.
  • If you are delinquent or in default, visit our Student Loan Default Assistance page for more help.