Note: Big changes are coming to the student loan system due to a new law and recent court cases. Key deadlines are approaching for borrowers who want to take advantage of current relief. Stay informed by signing up for updates from NCLC and checking studentaid.gov.
If you have federal student loans, you may be eligible to consolidate (combine) your loans into a new Direct Consolidation Loan. You may want to consolidate your loans if you have multiple loans and want to simplify repayment, or to make your loans eligible for certain loan repayment, relief, or forgiveness options. You may also want to consolidate defaulted loans to get out of default. If you have a Parent PLUS loan, consolidating your loan before July 1, 2026, will give you access to an Income-Driven repayment plan, too. However, there are some downsides to consolidation, discussed below.
Consolidation is similar to refinancing a loan. In both cases, you are taking out a new loan that pays off your existing loans. But consolidation is less risky because the new loan is still a federal loan, and you keep your federal student loan benefits. Refinancing replaces your existing loans with a new private loan.
Important: Only consolidate your loans using the federal Direct Consolidation Loan program. Consolidating or refinancing your federal student loans using a private loan refinancing or consolidation program will cause you to lose your federal student loan protections and benefits.
Direct Consolidation Loans are now the only type of federal student consolidation loan offered (although some borrowers still have older FFEL Consolidation Loans). Under the Direct Loan Consolidation Program, you can consolidate just about any type of federal student loan into a new Direct Consolidation Loan. You can consolidate all, just some, or even just one of your federal student loans. But you cannot consolidate private student loans into a federal Direct Consolidation Loan.
If you previously consolidated your loans with your spouse into a Joint Consolidation Loan, you may be able to undo the consolidation loan. The Department of Education is still working on the process for borrowers to separate their Joint Spousal Consolidation Loans. Get more information and updates on the process on the Department of Education’s website.
Interest rates for consolidation loans are fixed and set based on the interest rates of the loans you consolidate. There is no fee to consolidate your loans. Beware of any company that offers to help you with consolidation for a fee, as this is likely a scam. You can apply to consolidate your loans for free by completing the Direct Consolidation Loan application on the Department of Education’s website.
There are many good reasons to consolidate, but whatever the reason, you should consider the pros and cons before consolidating. Once you consolidate, you cannot undo the consolidation—so make sure this is the right step for you before you take this step.
Pros of Consolidating
- Combines multiple loans into one to simplify loan repayment
- Borrowers with FFEL and Perkins Loans can replace them with a Direct Loan that is eligible for more relief programs and benefits
- Borrowers with Parent PLUS loans who consolidate by July 1, 2026, will be eligible for IDR plans if they sign up for an IDR plan by July 1, 2028 (note: any new Parent PLUS loans taken out or consolidated after July 1, 2026, will not be eligible for Income-Driven Repayment)
Cons of Consolidating
- Potentially longer repayment period
- You may pay more interest over time
- You might lose certain benefits and options, including the option to use consolidation to get out of default in the future
- Consolidating certain types of loans together can limit your eligibility for some programs, but you can avoid this by leaving some loans out when you consolidate
- If you consolidate any loan after July 1, 2026, you will only be eligible for certain repayment plans –the Standard and RAP plan (just the Standard plan for Parent PLUS borrowers)
- A consolidation loan may not have any credit towards IDR cancellation, which means that consolidating may reset the clock for when you’ll be eligible for IDR loan forgiveness
- Consolidating loans with different repayment histories may impact when you’ll be eligible for PSLF.
