Benefits of Consolidation
1. Combines multiple loans into one to simplify loan repayment
If you have multiple federal student loans, and especially if your loans have different loan servicers, consolidating your loans into one Direct Consolidation Loan will simplify the process of managing your student loans. You’ll have a single loan with just one monthly bill, and only one servicer to deal with. And if you have an older student loan with a variable interest rate, consolidation will lock in a fixed interest rate.
2. Borrowers with FFEL and Perkins Loans can replace them with a Direct Loan that is eligible for more plans and benefits
Consolidating your FFEL or Perkins Loans will replace these older loan types with a new Direct Consolidation Loan. That means you’ll get the benefit of new programs that are rolled out to help student loan borrowers manage their loans, which FFEL and Perkins loans are often excluded from. Consolidating your Perkins Loans can give you access to income-driven repayment (IDR) plans that could lower your monthly payments. Under an IDR plan, your monthly payment could be as low as $0 per month and could earn you credit toward IDR or Public Service Loan Forgiveness (PSLF). Consolidating your FFEL or Perkins Loans can make you eligible for Public Service Loan Forgiveness (PSLF).
3. Borrowers with Parent PLUS loans who consolidate by July 1, 2026, can access more affordable IDR repayment plans.
Parent PLUS Loans are not eligible for IDR plans unless you first consolidate into a Direct Consolidation Loan. Because of changes coming to the student loan system as a result of the Big Bill, you have to consolidate your Parent PLUS Loans by July 1, 2026, and then sign up for an IDR plan by July 1, 2028, in order to be eligible for IDR. If you don’t consolidate your Parent PLUS Loans by July 1, 2026, or if you take out new Parent PLUS Loans after that date, you will only be eligible for the Standard Repayment plan. Additionally, right now studentaid.gov states that your consolidation application must be processed and finalized by July 1, 2026, so don’t wait to apply. It can take several weeks from when you apply to consolidate your loans for the application to be processed.
Downsides of Consolidation
1. Potentially longer repayment period
Consolidating your loans may increase the number of years in your payment plan if you are paying in the Standard or Graduated plans, from 10 years up to as many as 30 years (but your monthly payment may be lower than what you are currently paying). And if your payment period in the Standard Plan is more than 10 years, then those payments will not count towards Public Service Loan Forgiveness (PSLF) or IDR loan forgiveness.
2. You may pay more interest over time
If your repayment period is longer because of consolidation, you are likely to pay more interest over time. When you consolidate your loans, any outstanding interest on the loans you consolidate becomes part of the original principal balance on your consolidation loan. That means that interest may accrue on a higher principal balance than if you had not consolidated, leading you to pay more interest over time.
Your new interest rate is the weighted average of the interest rates of the loans you consolidate, rounded up to the nearest one-eighth of a percent.
If you consolidate loans with different interest rates, you won’t be able to pay off your higher-interest-rate loans faster by making additional payments on those loans. This is a strategy some borrowers find useful to reduce the amount of interest they pay.
3. You might lose certain benefits and limit options to get out of default in the future
If you consolidate all of your loans into a single Direct Consolidation Loan, then you will not be able to use consolidation to get out of default if you default in the future.
If you have a Perkins Loan and you work in a field that would make you eligible for Perkins Loan cancellation, you may not want to include your Perkins Loans when you consolidate. For more information, see our page on loan cancellation and forgiveness options.
4. Consolidating certain types of loans together can limit your eligibility for some programs
If you consolidate your current Direct Loans with other loans into a new Direct Consolidation Loan, you may lose certain benefits on those Direct Loans, such as access to certain IDR plans or loan cancellation, by combining them with the new Direct Consolidation Loan.
5. If you consolidate any loan after July 1, 2026, you will only be eligible for certain repayment plans
Because of the Big Bill that was signed into law on July 4, 2025, the student loan system is going to change significantly over the next two years. If you consolidate your federal loans (or take out new federal student loans) after July 1, 2026, you will only be eligible for the following repayment plans:
- All Direct Loans that you borrowed for your own education, including Direct Consolidation loans that only contain loans you borrowed for your own education, will only be eligible for the new Standard Plan and the new IDR plan, Repayment Assistance Plan (RAP).
- Parent PLUS Loans, including consolidation loans that contain Parent Loans, will only be eligible for the Standard Plan–you will not be eligible for RAP.
If you apply for a consolidation before July 1, 2026, but it is not processed or finalized until after July 1, 2026, you may be limited to the plans above.
Borrowers who don’t consolidate or take out new loans after July 1, 2026, will be eligible for more repayment plans (except for Parent PLUS borrowers, whose options will be different as described in more detail above). For more information about these changes, see our article on the Big Bill.
6. Consolidating your loans may change when you’re eligible for PSLF or IDR loan cancellation
Consolidating your loans may reset the clock for IDR loan forgiveness. This means that if you are close to IDR cancellation on all or some of your loans, you may not want to consolidate, as your time will restart at zero, and you will have to pay on your loans for an additional 20-30 years before they will be forgiven.
If you consolidate your loans and you have already earned credit toward PSLF, your payment count won’t be reset to zero, but it will change. Your new consolidated loan will receive a payment count based on a weighted average of the qualifying payments made on your original loans, giving greater weight to payments from your largest loan. This means that you won’t lose credit for past qualifying payments.
