Consolidating Your Federal Student Loans

November 27, 2022

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Borrowers can combine multiple federal student loans into a single Direct Consolidation Loan, possibly making the debt easier to manage. Simpler, though, is not always better, so the decision to consolidate should be made carefully.

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Pros and Cons of Consolidating

A federal consolidation loan cannot be “undone” once it has been disbursed, so weigh the advantages and disadvantages of consolidating before taking the steps to consolidate.

Pros of Consolidation:
  • Creates a single payment to a single servicer.
  • May possibly provide a lower monthly payment.
  • Provides a fixed interest rate.
  • May extend the repayment term up to 30 years - depending on the amount of debt and the repayment plan selected.
  • May make loans eligible for Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) or Public Service Loan Forgiveness (PSLF).
Cons of Consolidation:
  • May lose borrower benefits such as interest rate discounts or principal rebates.
  • May create a longer repayment term, which can result in paying more interest and greater repayment costs.
  • The new interest rate is a weighted average of the consolidated loans, so the rate will be rounded up to the nearest 1/8 of a percent.
  • May negatively impact grace, deferment, or forgiveness options.
Which Loans Can Be Consolidated...and When?

Most federal education loans are eligible for consolidation after you complete (or separate from) medical school. The following loans can all be considered for a Direct Consolidation Loan:

  • Direct Subsidized and Unsubsidized Loans can be consolidated when borrowers are in their grace period, or at any time in which the borrower is no longer enrolled full-time.
  • Perkins Loans can be consolidated; however, the subsidy and some extended grace options will be lost.
  • Direct PLUS Loans can be consolidated once the loan has been fully disbursed, and if the borrower is enrolled less than half-time.
  • Direct Consolidation Loans can be reconsolidated when new federal loans are included in a new consolidation application, or when attempting to move a loan into the Direct Loan program.
How to Consolidate

If your loans are in good standing, you can complete the Direct Consolidation Loan application online at: (Access to a paper application and additional directions are also available on this website.) If you are in default on a federal student loan, you may still be eligible for consolidation; however, you will need to meet certain requirements. Visit the Federal Student Aid website for more information.

Warning! If you’ve made any qualifying PSLF payments on any Direct Loans prior to applying for a Direct Consolidation Loan, contact your loan servicer to determine how those payments and/or your PSLF status may be impacted when applying for a new Direct Consolidation Loan.

When Does Repayment Begin on a Direct Consolidation Loan?

Repayment on a consolidation loan will generally begin within 60 days of disbursement, unless the borrower qualifies for a deferment or forbearance. Consolidation loans, like all federal education loans, do not have a prepayment penalty, so aggressive payments can be made to save time and money. 

Interest Rates for Consolidation Loans
The interest rate for Direct Consolidation Loans is fixed for the life of the loan and is based on the weighted average of the interest rates of the loans consolidated.

More Consolidation Loan Information
For additional details and step-by-step consolidation guidance, review the Federal Student Aid website. 

Related Resources
Repayment Plans for Federal Student Loans
Postponing Loan Repayment During Residency

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