Loan Consolidation is the process of combining multiple student or parent loans into one new loan with a new repayment term, interest rate and monthly payment.
FFELP Consolidation Loan
In the Family Federal Education Loan Program (FFELP), borrowers attain federally-guaranteed student loans through a private bank.
***We currently do not know of private lenders offering consolidation for federal loans. If you are interested in consolidating your federal loans with the federal government, please review the information below.***
Direct Consolidation Loan
Benefits of Direct Consolidation Loan:
- One lender (U.S. Dept of Education) and one monthly payment (easier to manage debt)
- Consolidation is free
- No minimum amount is required to qualify
- Reduced monthly payments
Who is eligible for a Direct Consolidation Loan?
- Borrowers must have at least one Direct or FFEL Loan that is in grace, repayment, deferment or default status. Loans in an in-school status cannot be consolidated.
Borrowers who do not have Direct Loans may be eligible for a Direct Consolidation Loan if:
- They include at least one FFEL Loan and have been unable to obtain a federal consolidation loan with a FFEL consolidation lender OR
- Have been unable to obtain a federal consolidation loan with income-sensitive repayment terms acceptable to them OR
- Intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program
There are three forms to complete:
- Direct Consolidation Loan Application
- Direct Consolidation Loan Promissory Note
- Repayment Plan Selection Form
**these forms can be completed online at http: www.loanconsolidation.ed.gov
Six Steps to calculate the interest rate of a Direct Consolidation Loan:
- Multiply each loan by its interest rate to determine the "per loan weight factor"
- Add the "per loan weight factors" together
- Add the loan amounts together
- Divide the "total per loan weight factor" by the "total loan amount" and then multiply by 100
Total per loan weight factor X 100 = Weighted Average Rate
Total Loan Amount
- Round the result of Step 4 to the nearest higher 1/8th of one percent if it is not already on an eighth of a percent.
- Compare the result of Step 5 with the interest rate cap of 8.25%. The fixed interest rate on the Direct Consolidation Loan will be the lower of the two
OR, you may use the calculator below:
Loan Consolidation Calculator:
For Additional Information about Direct Consolidation Loans:
Web - www.loanconsolidation.ed.gov
Phone - 1(800)557-7392 [8am-8pm, Mon-Fri]
Mail - U.S. Department of Education
P.O. Box 242800
Louisville, KY 40224-2800