Should You Consolidate?

February 10, 2022

New section

Your answers to the following questions may help you determine if loan consolidation is right for you. 

New section

New section

Do You Have Multiple Student Loans and Servicers?

A Direct Consolidation Loan can simplify loan repayment by providing one loan, one servicer, and one payment.

Do You Need a Lower Monthly Payment?

One benefit to consolidation is a single monthly payment with a required monthly payment that is less than the Standard payment plan amount. Consolidating can stretch the original 10-year Standard repayment term up to 30 years. However, this does not mean you must take 30 years to repay your loan. You can choose to pay the loan off as quickly as you would like, without any penalties, and the sooner you repay your loan, the less the loan will cost overall.

There may be other options to get a lower monthly payment – without consolidating. For example, income-driven repayment plans offer a lower monthly payment that are generally affordable during residency when your salary is lower. Discuss your repayment options with your servicer(s) or the financial aid staff at your medical school.

Are You Considering Working in Public Service?

Consolidating with Direct Loans may be necessary to make some federal loans eligible for Public Service Loan Forgiveness (PSLF). However, not all loans need to be consolidated to be eligible for PSLF. To review your loan portfolio, login to the Federal Student Aid website or contact your servicer(s).

The Federal Student Aid website lists the federal student loans that are eligible for PSLF.

Do You Have Private and Federal Student Loans?

If you find it difficult to repay both your private and federal loans, consolidation may offer an advantageous repayment strategy.

After consolidating your federal loans, you can request a Mandatory Medical Residency Forbearance to postpone payments on all your federal loans during residency. Then, while your federal loan payment is postponed, you can aggressively focus repayment on your private loan debt. 

Are You Considering the Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE)*, or the Income-Based Repayment (IBR) Plan?

For federal loans to be eligible for REPAYE, PAYE, or IBR, they must be Direct Loans. Federal loans that do not have the word “Direct” in their name would need to be consolidated to qualify for these repayment plans.

The Federal Student Aid website lists loans eligible for the income-driven repayment plans.

*There are additional requirements to qualify for the PAYE repayment plan. You must be a “new borrower” as of October 1, 2007, and you must have received a Direct Loan disbursement on or after October 1, 2011. Contact your servicer for detailed information about eligibility requirements.

To complete the Direct Consolidation Loan application or learn more about consolidation visit the Federal Student Aid website.

Related Resources

Effects of Student Loan Consolidation
Repayment Plans for Federal Student Loans
Consolidating Your Federal Student Loans

New section

Contact FIRST
Young male presenting doctor wearing scrubs looking at a computer.
AAMC Financial Wellness

Access free financial calculators, articles, and videos to help you create a budget, track your spending, create financial goals, and enhance your financial knowledge about credit, financial planning, money management, and more!

Visit AAMC Financial Wellness