A federal consolidation loan allows you to combine several types of federal student loans into a single loan with one monthly payment and a fixed interest rate.  It is often referred to as "refinancing" because all prior loans are paid off and a new loan with new terms and conditions is created.

Historically, students had the option to consolidate their loans through a private lender who participated in the Federal Family Education Loan Program (FFELP) or the Federal Direct Loan Program.  Due to the instability in the student loan markets the majority of FFELP lenders are no longer offering consolidation loans.  If you are interested in federal student loan consolidation, St. Thomas recommends you contact the Federal Direct Consolidation Loans Information Center. 

For your convenience the Graduate Financial Aid Office has provided some general information and facts on the federal loan consolidation process below. 

Consolidation Pros: reasons to consolidate

• A single and lower monthly payment
• Easier to manage one loan vs. loans with multiple holders
• No prepayment penalty
• No fees to consolidate
• Extended repayment periods
• Fixed interest rate

Consolidation Cons: reasons to consider before consolidating

• Prolong the life of the loan
• Pay more interest over extended repayment period
• Possible elimination of some deferment options
• Possible elimination of loan cancellation/forgiveness options
• Loss of grace period

Federal Loans eligible for loan consolidation

• Federal Stafford Loans (subsidized and unsubsidized)
• Federal Direct Stafford Loans (subsidized and unsubsidized)
• Federal Perkins Loans
• Federal PLUS Loans (if you are the borrower)
• Federal Graduate PLUS Loans
• Federal Insured Student Loan (FISL)
• Auxiliary Loan to Assist Students (ALAS)
• Federal Supplemental Loans for Students (SLS)
• National Direct Student Loans (NDSL)
• Loans for Disadvantaged Students (LDS)

How do I qualify for a Federal Direct Consolidation Loan?

You must have at least one Direct or Federal Family Education Loan Program (FFELP) loan that is in grace, repayment, forbearance or default status.  Students cannot consolidate while they are still enrolled in school at least half-time.  Students cannot consolidate private educational loans into their Federal Direct Consolidation Loan.

I have federal loans from multiple lenders.  Can I have those loans consolidated?

Yes. You can consolidate your loans under the Direct Loan Program and combine all of your outstanding federal loans into a new combined loan. This consolidated loan will have new terms, such as the interest rate and length of repayment, but will also retain some of the benefits you had under the other loans, such as deferment of payment if you pursue additional education.  With a Federal Direct Consolidation Loan, you have one loan with one payment per month. You may end up paying more interest than you would under the terms of your individual loans, so you do have to consider the cost of the consolidation loan versus the convenience of the single payment. However, as with all federal loan programs, there is no penalty for pre-payment, so you can always reduce the total accrued interest by paying more than the minimum monthly payment.

I have multiple loans from the same lender.  Can I consolidate these loans?

Yes. You may consolidate through the Direct Loan Program if you have more than one loan from a single lender. However, before you look at a consolidation loan you should consider why you would want to consolidate your loans. If you are seeking a lower monthly payment or a longer repayment term, those options may be available to you under the terms of your current federal loans. Contact your loan servicer to inquire about repayment options before deciding to consolidate your federal loans.

When can I consolidate my loans?

You can get a Federal Direct Consolidation Loan during your grace period, once you've entered repayment, or during periods of deferment or forbearance.   The in school consolidation process was repealed, effective July 1, 2006.  You should discuss your decision about when to consolidate with your lender/servicer.

How do I consolidate my loans?

There are two ways you can apply for a Federal Direct Consolidation Loan:

• Online Web Application - Apply online!
• Paper Application - Download a paper copy of the application and promissory note or have an application packet mailed to you by calling (800) 557-7392

If you plan to consolidate through a private lender, contact your lender of choice for application materials and instructions.

What if my federal loan holder is a private bank? Can I still consolidate through the Federal Direct Loan Program?

Yes, you can consolidate your loans through the Federal Direct Loan Program.  To begin the consolidation process, you should contact your current lender to see if they offer a consolidation loan program.   Due to the instability in the student loan industry many private lenders are no longer offering this option to their borrowers.  The U.S. Department of Education will continue to offer consolidation loans through the Direct Loan Program.  If your lender does offer loan consolidation it is a good idea to evaluate the benefits offered and compare those with the terms of a Federal Direct Consolidation Loan.

If I am applying for a Federal Direct Consolidation Loan, do I have to keep making payments on my current loans?

Until you receive notification that the consolidator has paid off your original loans, continue making payments on those loans. You don't want to go into default on those loans, since that would prevent your consolidation loan application from moving forward. Any payments you make to a current loan holder after the loan has been paid in full by consolidation will be forwarded to your consolidation lender.

You may also request a forbearance while you are consolidating your loans. This will allow the lenders to advance your due date to allow time for the loan consolidation to go through.

I have just one loan.  Can I consolidate?

Yes, so long as the loan being consolidated is not itself a consolidation loan. To reconsolidate a consolidation loan, you must be including additional loans. Otherwise, you can consolidate even just a single loan.

I consolidated a few years ago.  Can I consolidate again?

Consolidation loans may only be reconsolidated when you are adding more loans to the consolidation.  If you do not have other federal education loans to include in the new consolidation loan, you cannot reconsolidate a consolidation loan. 

What is the interest rate on a consolidation loan?

The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.

I don't remember who my lender is.  Help!

The best place to check on your loan borrowing is the National Student Loan Database System (NSLDS). You may access your borrowing history online at the National Student Loan Database web site at www.nslds.ed.gov. To access your information, you'll need your Social Security Number and your Federal PIN.