Loan Repayment

Loan Consolidation

As you make plans for repaying your student loans, you may be considering loan consolidation as an option.  Consolidation allows you to pay off some or all of your existing student loans by combining them into a single, large loan.  There are two types of consolidation programs for education loans:

Federal Consolidation Loans

  • For Direct or FFEL loan programs
  • Parents able to consolidate Parent PLUS Loans. Parent and Student loans cannot be combined in consolidation.
  • The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
  • Deferment options predetermined by federal regulations
  • Cannot include non-federal (private) loan funds
  • No fees to consolidate your federal loans

Private Consolidation Loans

  • Separate from Federal Consolidation
  • Rates and terms (including deferment and forbearances) are set by loan lender, not by the federal government
  • Usually a variable interest rate

Loan consolidation may lower your total monthly repayment amount. However, any consolidation loan is also likely to significantly increase the total amount of interest that you will be required to pay. You may also lose any remaining grace period on your consolidated loans. If you are able to meet your current monthly repayment obligations, it may be best for you to avoid consolidation.

You may want to estimate the amount that you can afford to pay on a federal consolidation loan based on your monthly income, using the U.S. Department of Education’s Online Calculator.  Additional information about consolidation can be found on the Department of Education’s website for Loan Consolidation.

Updated on September 29, 2022 10:36 AM