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  • 3m.

    Federal Consolidation Loans: Before You Borrow

    Federal Consolidation loans combine borrowers' federal loans into a single loan with one monthly payment. Consolidating is convenient, but it can cost you money and your loan's specific benefits.
    Updated: November 14, 2016

    What You'll Learn

    • How to qualify for a Consolidation loan.
    • How Consolidation loan interest rates are calculated.
    • Why consolidation isn't the right option for everyone.
    Federal Consolidation Loans: Before You Borrow.

    The Highlights

    Who can borrow these loans?Borrowers in repayment
    How much can I borrow?No limit
    What's the current interest rate?A weighted average of the underlying loan rates, rounded up slightly.
    Am I responsible for paying the interest?Yes

    Dig Into The Details

    Who Can Borrow These Loans?

    Most likely, you! A Consolidation loan is a new loan that pays off all your current loans (or just the ones you choose to include), leaving you with just one federal student loan—and one federal student loan payment per month.

    If you have eligible federal student loans, you can likely consolidate them in the William D. Ford Federal Direct Loan (DL) Program. Go to to complete the consolidation process. Note that you cannot include private student loans in a DL consolidation.

    DL is the only federal student loan consolidator. You may be able to consolidate your federal loans with a private lender, but if you do, you'll lose the benefits of borrowing through the federal student loan program, such as deferment, forbearance, discharge, forgiveness, and flexible repayment options.

    When Do My Payments Start?

    They've probably already started—or they will soon. You need to be in your grace period or already repaying your loans to consolidate them.

    How Do I Know If I Have A Federal Consolidation Loan?

    Check the U.S. Department of Education's National Student Loan Data System (NSLDS®) for info on these federal student loans. NSLDS will tell you:

    • If you have a federal Consolidation loan.
    • How much you owe on it.
    • Who you should contact about repayment.

    How Much Can I Borrow?

    There's no annual or total borrowing limit. You can consolidate as much as your eligible federal loans are worth.

    What's The Current Interest Rate?

    Consolidation loans have fixed interest rates that are calculated by taking the weighted average of the interest rates on all of the loans being consolidated and rounding up to the nearest 1/8th of a percent. This means that there is no set consolidation interest rate. It all depends on what your current loans' interest rates are.

    Am I Responsible For Paying The Interest?

    Yes. If you consolidate subsidized loans, the government will cover the interest on them while they’re in approved deferment periods. For all other loans, you're responsible for paying the interest during the entire life of the loan.

    Be Money Smart

    With their single payment, federal Consolidation loans make paying your loans easy—but it isn't the right option for everyone. When you consolidate your loans, you usually extend your repayment period by at least 2 years. That means you pay interest on your unpaid loan balance for longer, which makes your loans more expensive.

    Here's how it works:

    How Much You ConsolidatedYour New Repayment Period
    $7,500–$9,99912 years
    $10,000–$19,99915 years
    $20,000–$39,99920 years
    $40,000–$59,999<25 years
    $60,000 and up30 years

    Extending the amount of time you have to finish repaying your loan will lower your monthly payments, but it increases the amount you repay overall. However, you can counteract this by paying more than your minimum payment each month.

    Consider this: $10,000 in consolidated loans at an interest rate of 6.825% costs you about $16,000 over 15 years.

    consolidation chart 1

    By basing your payments on a 10-year schedule, that overall amount drops to roughly $13,800.

    consolidation chart 2

    Here's the best part: The difference between repaying your loans for 10 years ($115/month) and repaying for 15 years payments ($89/month) is only $26 each month. Could you do something small to cut back on your spending, like bringing your lunch from home once a week instead of going out, to cover the difference?

    Actualizado: 14 noviembre 2016
    Federal Consolidation Loans: Before You Borrow.
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