Benefits of Consolidation
1. Borrowers with most FFEL and Perkins Loans can replace them with a Direct Loan that is eligible for the Repayment Assistance Plan (RAP) and Public Service Loan Forgiveness (PSLF).
Consolidating your FFEL or Perkins Loans will replace these older loan types with a new Direct Consolidation Loan, which will change those loans’ repayment and forgiveness options. Before consolidating, FFEL loans are only eligible for one Income-Driven Repayment (IDR) plan, the Income-Based Repayment Plan (IBR), and Perkins loans aren’t eligible for any IDR plan. If those loan types are included in a consolidation loan that is disbursed after July 1, 2026, the new consolidation loan will be eligible for the new RAP plan (if the consolidation loan does not contain a Parent PLUS loan) as well as the new Tiered Standard plan. In addition, only Direct Loans are eligible for Public Service Loan Forgiveness, so you must consolidate FFEL and Perkins loans if you want them to receive PSLF credit moving forward.
2. Consolidating loans is one pathway out of default.
If your loans are in default, consolidation is one way to get them back into good standing. To learn more about your options, visit Getting Out of Default.
3. Consolidating may reduce monthly standard payments by extending your repayment period.
Consolidating will provide a new repayment period of between 10 and 25 years for borrowers who want to make fixed monthly payments in the Tiered Standard Plan. For some borrowers, especially borrowers with Parent PLUS loans that are ineligible for IDR, this could result in more time to repay and lower monthly payments. However, taking longer to repay may result in paying more interest over time (see below). Additionally, borrowers who want to reduce their monthly payments should consider other repayment options first, including IDR plans and the Extended plan.
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 more years up to as many as 25 years in the new Tiered Standard Plan. While some borrowers might want to lengthen their repayment period so their monthly payments will be lower, other borrowers might prefer to pay off their loans faster.
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. Additionally, 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 total amount of interest they pay.
3. If you consolidate any loan after July 1, 2026, you will only be eligible for certain repayment plans
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 Tiered Standard Plan and the new IDR plan, Repayment Assistance Plan (RAP).
- Parent PLUS Loans, including consolidation loans that contain any Parent Loans, will only be eligible for the new Tiered 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, including more IDR plans (except for Parent PLUS borrowers, who will not be eligible for an IDR plan unless they consolidated their Parent PLUS loan before July 1, 2026. For more information, see our blog on this issue.).
4. If you include Parent PLUS loans in your consolidation loan and the consolidation loan is disbursed on or after July 1, 2026, the consolidation loan will not be eligible for any Income-Driven Repayment Plan.
Consolidation loans made on or after July 1, 2026 that contain a Parent PLUS loan must be repaid in the new Tiered Standard Plan – there will not be any other repayment options for these loans. For more information about how consolidating on or after July 1, 2026 will impact Parent PLUS borrowers, visit this blog.
5. Consolidating your loans may change when you’re eligible for PSLF or IDR loan cancellation
Consolidating your loans will likely reset the clock for IDR loan forgiveness and eliminate any time that you have already earned toward forgiveness. This means that if you have made significant progress toward IDR cancellation on all or some of your loans, you may not want to consolidate, as your time toward forgiveness will restart at zero. Additionally, if you consolidate on or after July 1, 2026, the only IDR plan that you will be potentially eligible to repay your Direct Loans in is the new RAP plan, which has a 30-year forgiveness period as compared to the 20 to 25-year forgiveness period in IBR. This means that if you consolidate, you will have to pay on your loans for an additional 30 years before they will be eligible for forgiveness in IDR.
If you consolidate your loans and you have already earned credit toward PSLF, your PSLF payment count won’t be reset to zero, but it may 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. Additionally, if you consolidate after July 1, 2026 and want to continue earning credit in PSLF, you must repay on the RAP plan. Payments in the new Tiered Standard Plan do not qualify toward PSLF.
6. 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.
