Consolidate Federal Student Loans

The Federal Direct Loan Program (FDLP) from the U.S. Department of Education allows borrowers to consolidate federal student loans. Under this program, a borrower's federal school loans are paid off and a new master consolidation loan is created. The end result: 1 loan, 1 monthly payment and 1 set of repayment terms.

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The FDLP simplifies loan repayment by combining several types of federal education loans (that may have different terms and repayment schedules or may have been made by different lenders) into one new loan. This can include loans from both the Direct Loan Program and now defunct Federal Family Education Loan Program (FFELP).

In addition, the monthly payment amount on a consolidation loan is usually lower and the amount of time to repay may be extended beyond what was available in the separate loan programs. These features should result in more manageable debt and should make borrowers less prone to default.

Federal Consolidation Loan Interest Rate

The interest rate for federal student loan consolidation is the weighted average of your consolidated loans, rounded up to the nearest one-eighth percent (0.125%). This interest rate is fixed, and will never change once the loan is finalized. The current Department of Education policy caps federal consolidation loans at a maximum of 8.25% APR.

Benefits of Federal Student Loan Consolidation

• Lower monthly payments (due to lengthening of loan repayment period)
• One master student loan bill and payment, instead of many
• 0.25% interest rate reduction for enrolling in automatic payments from a checking or savings account (also referred to as ACH)

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Federal Consolidation Eligibility

For federal student loans in a grace, deferment or repayment status, the following types of loans are eligible for federal loan consolidation:

• Federal FFEL and Direct Stafford (subsidized and unsubsidized)
• Federal FFEL and Direct PLUS (in borrower's name only)
• Federal Perkins (formerly known as National Direct Student Loan or NDSL)
• Nursing School Loan (NSL)
• Health Professional Student Loan (HPSL)
• SLS (Supplement Loan for Students)
• Loans for Disadvantage Students (LDS)
• Federal Insured Student Loan (FISL)
• Federal FFEL and Direct Consolidation Loan