A federal consolidation loan allows student borrowers to combine one or more of their federal education loans into a one new loan. Offered by the U.S. Department of Education, Direct Consolidation Loans often provide lower interest rates as well as the convenience of making one monthly payment.
With only one lender and one monthly payment, it is easier for former students to manage debt associated with attending school. Federal consolidation loans have only one lender, the U.S. Department of Education. When repaying a Direct Consolidation Loan, student borrowers may choose from four repayment plans:
The qualification rules for Direct Consolidation Loans require student borrowers to have at least one Federal Family Education Loan (FFEL) or a Direct Loan that is in grace, repayment, deferment, or in default. In-school status loans are not eligible for consolidation.