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A consolidated loan combines multiple loans into one. This enables the borrower to pay only one monthly loan payment rather than several different payments. The federal government has guidelines for people who wish to consolidate federal student loans.

How to Apply for a Direct Consolidation Loan

StudentLoans.gov is the government website where borrowers go to apply for a consolidation loan. Applications can be submitted electronically, and the applicant also has the option of printing and submitting a paper application.

To apply for the loan online, the applicant must create a user name and password. Then, the applicant must choose which loans to consolidate as well as a repayment option. The options inform the applicant of how much monthly payments would be as well as how many months the borrower must make payments on the loan. Next, the applicant must read and agree to the terms and conditions of the loan. If any questions arise, the applicant should call the Loan Consolidation Information Call Center.

Do I Qualify for a Consolidation Loan?

Once the application is completed, the applicant will be contacted by the consolidation servicer. In order to qualify for a consolidation loan, the following conditions must be met:

Repayment Options

  • Applicant must have at least one FEEL loan or Direct Loan currently in repayment or in a grace period.
  • To consolidate a defaulted loan, the borrower must agree to repay the new consolidation loan under the terms of the Income-Contingent Repayment Plan, the Income-Based Repayment Plan or the Pay As You Earn Repayment Plan. Or, the borrower could make repayment arrangements with the current loan servicer.
  • In general, current consolidation loans can’t be consolidated again unless an additional FEEL loan or Direct Loan is included in the consolidation. However, certain circumstances do allow borrowers to consolidate without including additional FEEL or Direct Loans.

The federal government does not charge a fee for consolidating federal loans. Before choosing to consolidate, the borrower should look carefully at the terms of the new offer. Will consolidation lower the monthly payments on the loan? If so, this will most likely lengthen the repayment schedule. A borrower who wants to make smaller payments over an extended period might be satisfied with these terms. However, a borrower who can afford to make larger payments might want to do so in order to repay the loan more quickly.

The federal student aid website has detailed information on repayment options. This allows the applicant to compare the loans for which they qualify. Some loan consolidation options allow the applicant to adjust payments based on their income. Other repayment plans give the borrower the option of beginning with smaller payments and then gradually making larger payments over time.