Loan Consolidation
Federal student loan consolidation is an option for borrowers looking to either combine their Federal Family Education Loan Program (FFELP) loans into one loan or to lower their monthly payment. There are many points to consider before signing a consolidation loan application and promissory note. Please take a moment to review the information provided on this site.
For any questions regarding consolidation, please feel free to contact FAME at 1-800-228-3734 or by e-mail.
A consolidation loan is when multiple federal student loans are purchased by a lender and combined into one new loan resulting in a single, lower monthly payment for the borrower. The borrower signs a new application and promissory note. The original loans are paid off and a new single loan is created.
The interest rate is calculated using a weighted average rounded to the nearest eighth of one percent, not to exceed 8.25%.
- Borrowers who have loans with several different lenders and who want to make a single monthly payment.
- Borrowers who do not expect to be able to meet future monthly payments unless the payment amount is reduced and the repayment period is extended.
- Borrowers who owe substantial amounts on FFEL loans with 8.25% or 9.00% interest rate caps and who want to lock in a fixed interest rate that is lower than the 8.25% cap.
- Borrowers who have at least one of the following eligible loans:
- FFELP loans (Stafford, PLUS, SLS, and Consolidation loans).
- FDLP loans (William D. Ford Federal Direct Loan Program).
- FISL (Federal Insured Student Loans).
- Perkins loans.
- HPSL (Health Professions Student Loans).
- LDS (Loans for Disadvantaged Students).
- HEAL (Health Education Assistance Loans).
- ALAS (Auxiliary Loans for Students).
- NSL (Nursing Student Loans).
- If any loans being considered for consolidation are in default, the borrower must either make satisfactory repayment arrangements with the holder of each defaulted loan, or agree to repay the consolidating lender under an income-sensitive repayment schedule. For more information on this option, please contact FAME.
- A borrower must not be subject to a judgement.
- A borrower must certify that he or she does not have another federal consolidation loan application pending.
- Consolidation may be requested from any participating lender, regardless of whether the consolidating lender is a holder of any of the borrower's loans.
- A borrower who currently has a Federal consolidation loan is not eligible for a subsequent federal consolidation loan unless the borrower has obtained a new eligible loan after the date the existing consolidation loan was made or the borrower is consolidating an existing consolidation loan with at least one other eligable loan.
- Standard Repayment: A payment amount is established that remains the same throughout the repayment period, unless an adjustment is necessary to make sure the maximum allowable term is not exceeded.
- Graduated Repayment: The initial monthly payment amount is lower, and then gradually increases every two years until the loan is paid off.
- Income-Sensitive Repayment: The monthly payment is based on the borrower's income and student loan debt. As your income increases, the monthly payment amount increases to ensure payoff within the maximum allowable term.
| Sum of Consolidation Loan Balances |
Maximum Repayment Period |
| Less than $7,500 |
10 years |
| $7,500 or more, but less than $10,000 |
12 years |
| $10,000 or more, but less than $20,000 |
15 years |
| $20,000 or more, but less than $40,000 |
20 years |
| $40,000 or more, but less than $60,000 |
25 years |
| $60,000 or more |
30 years |
- Consolidation loans roll several loans into one monthly payment, turn a variable interest rate debt into a fixed interest rate debt and may extend the repayment period. Borrowers who can afford larger monthly payments can request a shorter repayment period.
- The longer loan repayment period will result in a lower monthly payment amount but will increase the amount of interest to be paid over the term of the loan.
- Special consideration should be given prior to including Perkins Loans in a consolidation. Perkins Loans lose deferment, forgiveness, cancellation and interest subsidy benefits if they are included in the consolidation loan.
- A consolidation loan is a new loan and pays off all the loans included in the consolidation.
- Consolidation loans cannot be "unconsolidated."
- There are no application fees, no origination fees and no pre-payment penalties.
- If you consolidate while in a grace period, you will lose any remaining grace period.
- Remember that for a Stafford loan, the student is the borrower; therefore, parents may not consolidate children's Stafford loans.
- Students may not consolidate their parents' PLUS loans
- Borrowers who consolidate during the repayment phase must continue to make payments while the consolidation is being processed unless their lender(s) have granted a deferment or forbearance on payments.
- If you consolidate while in deferment, you must reapply for deferment after the consolidation loan is disbursed.
- Borrowers who consolidate retain their basic deferment eligibility on all Stafford loans as well as interest benefits on the subsidized portion of Stafford loans being consolidated.
- Borrowers whose Stafford Loans or PLUS loans are part of an interest rate discount program may lose those discounts when they consolidate.