Updated September 17, 2018

If you have multiple student loans right now, you may be wondering how you can combine them all into one. Sometimes, having multiple loans and payments to make can be confusing, and after a while, you may lose track of how much you owe and where your money is going.

Before you start to panic, there are some options for you to consider to make student loan repayment less of a hassle and that is through the Federal Direct Consolidation program.

Let’s take a closer look at what federal consolidation is and how it can benefit you in the long run.

What is Federal Direct Consolidation?

Federal Direct Consolidation allows you to combine together all of your federal student loans into a single loan called a Direct Consolidation Loan. When you do this, you only need to make one monthly payment and you only have one interest rate to worry about.  

What are the Requirements?

There are requirements that you must meet to consolidate your loans and it is important to make sure that you meet these requirements before attempting to consolidate. It is also helpful to know which loans are able to be consolidated and we will go over those after we go through the requirements.

First and foremost, you need to apply to consolidate your loans as you will not just simply receive a consolidated loan. In addition, you can only consolidate federal loans with federal loans and not private student loans

Next, your loan must be ether an FFEL program loan or Direct Loan and one of them must be within a repayment period or grace period. If your loan is in default you cannot consolidate it unless you make some type of satisfactory repayment plan through your loan provider.

You must make the repayment plan under one of the following options:

  • Income-Contingent Repayment Plan
  • Income-Based Repayment Plan
  • Pay as You Earn Repayment Plan

Now, we can discuss the types of loans that are eligible to be consolidated. Some of them include:

  • PLUS Loans (Parent and Grad)
  • Direct Unsubsidized and Subsidized Loans
  • Unsubsidized and Subsidized Stafford loans
  • Perkins Loans
  • SLS loans
  • Federal Nursing Loans
Public Colleges Where Students Earn the Most Scholarship Funding

Benefits of Federal Direct Consolidation

There are quite a few benefits and reasons why you may want to consolidate your student loans. One of the main reasons is because the single payment will eliminate the possibility of forgotten payments. 

Another reason is because you will receive a fixed interest rate on your loans and only one interest rate as opposed to multiple interest rates over multiple loans. The specific interest rate you receive will depend on what the interest rates are for your current loans. In fact, it will be a weighted average of the loans that you choose to consolidate.

For example, if you have four loans out right now with equal balances and interest rates of 4.5 percent, 6.7 percent, 5.9 percent, and 7.8 percent, your interest rate will fall somewhere between 6.10 percent and 6.3 percent.

Lastly, another benefit that many students enjoy is that you still have protection should financial hardship arise even after consolidation. So, if you lose your job or lose income, you can apply for a different payment structure or an income-drive repayment option.  

Application Process

To apply for a consolidation, you will need to speak with your federal student loan servicer. You are usually able to fill out an online or paper application. You will need to send in any requested documents when submitting your application as well. Your loan servicer will be in contact with you to help you finish completing the process.

Federal Direct Consolidation is a great option for those students who are looking to combine their student loans into a single payment. Talk to your loan provider today to learn more about the process and whether or not you qualify.    

Alternatives to Federal Direct Consolidation

You can also consolidate student loans with a private lender or bank while also refinancing them to get a lower interest rate. Just know that if you go this route, you will lose federal benefits like deferment protections and the ability to use income-driven repayment plans.