Loan Consolidation
The Federal Direct Consolidation Loan Program exists to allow borrowers to combine any or all of their outstanding federal student loans into a single new loan. Before you decide to consolidate your loans, take some time to see if you would benefit. Check out FAME’s Loan Consolidation Calculator to estimate your repayment period, interest rate and repayment schedule if you consolidate your federal student loans.
Here are some factors to consider:
Are your monthly payments manageable? If you have trouble meeting your monthly payments, have exhausted your deferment and forbearance options, and/or want to avoid default, consolidation may help you.
Are you making multiple payments? If you send payments to more than one lender every month, and want the convenience of a single monthly payment, consolidation may be right for you.
What are the interest rates on your loans? If you have variable interest rates on your Federal education loans, you may want to consolidate. The interest rate for a Direct Consolidation Loan is fixed for the life of the Direct Consolidation Loan. The rate is based on the weighted average interest rate of the loans being consolidated, rounded to the next nearest higher one-eighth of one percent and cannot exceed 8.25 percent.
How much are you willing to pay over the long term? Like a home mortgage or a car loan, extending the years of repayment increases the total amount you have to repay.
How many payments do you have left on your loans? If you are close to paying off your student loans, it may not be worth the effort to consolidate or extend your payments.
To qualify for a Direct Consolidation Loan, you must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment or default status. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan.
NOTE: Borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011 may qualify to consolidate loans that are in an in-school status into a Direct Consolidation Loan. Visit the Federal Direct Loan Consolidation for more information on the eligibility requirements for this temporary provision.
Borrowers can consolidate most defaulted education loans, if they make satisfactory repayment arrangements with the current loan holders or agree to repay their new Direct Consolidation Loan under the Income Contingent Repayment Plan.
Loan eligible for consolidation include:
- Federal Subsidized and Unsubsidized Stafford Loans (Both Direct and those that were borrowed through a FFELP Lender)
- Subsidized & Unsubsidized Federal Consolidation Loans
- Direct Unsubsidized Loans, including Direct Unsubsidized Loans (TEACH) (converted from TEACH Grants)
- Federal PLUS Loans (for parents or for graduate and professional students)
- Federal Perkins Loans
- National Direct Student Loans (NDSL)
- National Defense Student Loans (NDSL)
- Federal Supplemental Loans for Students (SLS)
- Auxiliary Loans to Assist Students (ALAS)
- Health Professions Student Loans (HPSL)
- Health Education Assistance Loans (HEAL)
- Nursing Student Loans (NSL)
- Loans for Disadvantaged Students (LDS)
Please note that loans made by a state or private lender and not guaranteed by the federal government are NOT eligible for Federal Loan Consolidation. While these loans may not be included in a Direct Consolidation Loan, they may be considered in the calculation of the maximum repayment period under the Graduated or Extended Repayment Plan.
There are several ways that you can apply for a Direct Consolidation Loan:
- Online Web Application: Apply online at the Federal Direct Loan Application and Promissory Note Home Page.
- Express Phone Application: Apply over the phone at 1-800-557-7392. This option is only available if you only have Federal Direct Loans.
- Print a Paper Application: You can complete and print a copy of the application and promissory note - including the complete contents of the application package.
- Order an Application: Call 1-800-557-7392 to request an application package be mailed to you or request an application via e-mail.