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In general a consolidation loan will allow someone to consolidate various loans or federal student loan types to make repayment easier and possibly save money. If you only have one student loan it may be possible to consolidate it. Both the FFEL (Federal Family Education Loan) and Direct Loan Programs offer consolidation loans. Which one you are able to use for consolidation depends on who you used for your original lenders and the types of loans you are trying to consolidate.

What is the difference between a Direct Loan and a Federal Family Education Loan (FFEL)?
One of the main differences includes the types of loans that can be consolidated. Not all loans can be consolidated under certain programs. In addition, some lenders may require a minimum balance or a certain number of loans.

What benefits does a Direct Consolidation Loan offer?

A Direct Consolidation Loan makes it possible for borrowers to combine one or more Federal education loans into one new loan. This has several advantages:

One Monthly Bill
One lender and one monthly bill make it simple for borrowers to get control of their debt. The U.S. Department of Education is the only lender for all of the loans included in the Direct Consolidation Loan.

Flexible Payment Plan Options
Borrowers have four different payment plan options to repay their Direct Consolidation Loan. All are designed to be flexible in order to accommodate the needs of borrowers, including an Income Contingent Repayment Plan. And as needs change, borrowers can switch over to another type of repayment plan at anytime.



No Minimum Requirement
Consolidation is free, and there is no minimum amount required to qualify for a Direct Consolidation Loan.

Additional Deferment Options
If borrowers have used up the deferment options of their current Federal education loans, many of the deferment options may be renewed through a Direct Consolidation Loan. There may also be extra deferment options available to borrowers when they get their first Direct Loan if they have any outstanding balance on a FFEL Program loan made before July 1, 1993.

Monthly Payments Lowered
A Direct Consolidation Loan could potentially lower the borrower’s overall monthly payment. The minimum payment on a Direct Consolidation Loan may actually be lower than current combined payments on a borrower’s Federal Education loans.

Keep Your Subsidy Benefits
The Direct Consolidation Loan offers two (2) portions: Subsidized and Unsubsidized. A borrower can keep their Subsidy benefits on loans that are combined into the ‘subsidized’ portion of the Direct Consolidation Loan.

If I don’t have any Direct Loans, can I still qualify for a Direct Consolidation Loan?

If the borrower has at least one FFEL Loan and has not been able to get a Federal Consolidation Loan with a FFEL consolidation lender, they may be eligible for a Direct Consolidation Loan. The borrower may also qualify if they have been unable to obtain a Federal Consolidation Loan that offers acceptable income-sensitive repayment terms.

If I’m still enrolled in school, can I begin consolidating my loans?

It depends. As of July 1, 2006, borrowers enrolled in school are not able to consolidate loans that are in an in-school status. This includes loans that have not yet been entered or have not yet reached the end of the 6-month grace period entitlement. However, if the current loans are in grace, repayment or deferment status, borrowers still can consolidate. For up to 180 days after the Direct Consolidation Loan is disbursed, borrowers can add loans to this consolidation. After 180 days, borrowers can apply for a new Direct Consolidation Loan, but it must include the original Direct Consolidation Loan and one more eligible outstanding Federal education loan.

Can I combine an existing consolidation loan into a Direct Consolidation Loan?

Yes, under the following conditions:
  • The borrower includes at least one more FFEL or Direct Loan into the new Direct Consolidation Loan
  • The FFEL consolidation loan is in default status or it has been turned into a guaranty agency to avoid default by the borrower’s loan holder.

How long does the consolidation process take once I submit my application?

The process can vary but it usually takes between 60-90 days. To help reduce the amount of time, be sure to use an online Web application to apply.

Can I prepay on my loan?

Yes, either all or part of the unpaid balance on any Direct Loan can be paid without any penalty for early repayment. If a payment is made that is larger than the required monthly payment, the payment will first apply to any charges or collection costs, and then to outstanding interest, and to principal last. However, if the account does not have any outstanding interest, the additional payment will be applied directly to the principal. If double the monthly payment is made, the borrower will be notified of the revised due date for the next monthly payment.