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Should I consolidate my federal student loans into a federal Direct Consolidation Loan?

New! On Oct. 6, 2021, the U.S. Department of Education (ED) announced a temporary period during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF. For current PSLF guidance and to learn more about this limited time opportunity visit ED's website.

Before consolidating your federal student loans, consider how it will impact your interest rate and your access to different repayment options and other benefits.

If you are thinking about consolidating your federal student loans into a federal Direct Consolidation Loan , here are some questions to ask yourself:

Do you want to combine more than one federal loan into a single payment?

Loan consolidation can simplify your monthly payments by rolling multiple loans into one loan. After consolidating your loans, you will only have to make a payment to one student loan servicer. This may make it easier to keep track of your student loans.

Do you want a fixed interest rate loan instead of a variable rate loan?

Some older federal student loans have a variable interest rate. If you have a variable rate student loan, your interest rate can go up or down over time. Direct Consolidation Loans have a fixed interest rate, meaning your interest rate will not change over the life of the loan.

The fixed interest rate for a Direct Consolidation Loan is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of a percent. While consolidating your loans may slightly increase your interest rate, it will lock you into a fixed interest rate, so your new payment won’t change.

Do you want access to different repayment options?

A Direct Consolidation Loan could make you eligible for several repayment plans that may not be currently available to you. If you have federal loans through the Federal Family Educational Loan (FFEL) program or the Perkins loan program, you may be able to consolidate those loans to qualify for several repayment programs. Consolidating federal loans may cause you to give up other benefits. Borrowers with Perkins loans should talk to their servicers about the risks associated with consolidation.

Do you want to qualify for Public Service Loan Forgiveness?

New! The U.S. Department of Education announced a change to PSLF program rules for a limited time because of the COVID-19 national emergency.

Under the new rules, once you take the necessary steps, any prior federal student loan payment made will count as a qualifying payment, regardless of loan type, repayment plan, or whether the payment was made in full or on time. All you need is qualifying employment.

This change will apply to student loan borrowers with Direct Loans, those who have already consolidated into the Direct Loan Program, and those who apply to consolidate into the Direct Loan Program by Oct. 31, 2022.

For more information visit studentaid.gov/announcements-events/pslf-limited-waiver .

Note: Generally, Parent PLUS loan are not eligible for the PSLF Limited Waiver. Contact your servicer to learn more about your options.

Do you want to get out of default?

Consolidation allows you to pay off defaulted loans with a new loan and new repayment terms. If you cannot afford to repay your loan in full, consolidation is the fastest way to get out of default and enroll in one of the U.S. Department of Education’s other payment plans.

Warning: Consolidating federal loans may cause you to give up other benefits. Borrowers with Perkins loans (which qualify for a separate cancellation program) or those serving in the military should talk to their servicers about the risks associated with consolidation.

TIP: If you’re planning to enroll in an income-driven repayment plan and work with multiple servicers, it might be easier to have a consolidation loan, so you won’t need to submit documents about your income and household size to multiple servicers.