How to Consolidate Federal Student Loans

Sheryl Nance-Nash Updated on May 3, 2019

Some say more is better, but less is okay too, especially if you’re talking about student loan payments.

Consolidating loans – meaning you combine multiple loans into one new loan with one new monthly payment — can simplify your student loan debt management. 


If you consolidate your federal student loans through a Direct Consolidation Loan, you’ll not only simply your monthly payment, you'll also have the opportunity to lower that payment.

If you have both federal and private student loans, a private lender can help you consolidate both types of loans — but it’s a different process with different terms.

Let’s talk about the steps you need to take if you want to consolidate your federal loans through the government.

How federal student loan consolidation works

The idea of getting your federal loans under one umbrella probably sounds good, but you’re likely wondering how it all comes together.

Simply put, when you consolidate, the government replaces all of your existing federal student loans with a single Direct Consolidation Loan.

This loan comes with a new interest rate, but it’s not necessarily a lower one like you would get through private student loan refinancing. Rather, your interest rate will be calculated based on the weighted average of the interest rates on your existing federal student loans, rounded up to the nearest one-eighth of 1%.

The rate is fixed, meaning you don’t have to worry about it going up, up, up during the years you’ll paying it off. 

Should you consolidate your student loans?

There are several pros of consolidating your federal student loans.

  • Consolidating into a Direct Loan allows you to take advantage of income-driven repayment options and extend your loan term to make payments more manageable.

  • If you work in a qualifying job, consolidating your loans to a Direct loan may allow you to take advantage of Public Service Loan Forgiveness Program (PSLF). Only Direct loans qualify for PSLF.

  • If you have several federal loans managed by different servicers and requiring many separate payments, you’ll probably appreciate having one payment instead of several.

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Know the downsides

While there are significant benefits to consolidating your federal student loans, make sure you're aware of the potential cons. 

  • If you get a new loan term from the government based on your total balance, you may be making smaller individual payments but you’ll end up paying more in interest over the longer term.

  • You could lose benefits that come with specific loans. For example, if you consolidate federal Perkins Loans – which are forgiven gradually for some teachers who work in low-income areas, law enforcement officers, and other public servants – you will lose these forgiveness benefits.

  • If you’ve already been making qualifying payments toward PSLF, the clock resets when you consolidate. That is, you’ll need to make 120 new qualifying payments before your loan balance is forgiven.

Make it happen

Here are the steps to consolidate your federal student loans:

  1. Find your Federal Student Aid (FSA) ID — You got an FSA ID when you applied for FAFSA (Free Application for Federal Student Aid). Can’t remember yours? Find out what to do.

  2. Apply for consolidation online — Or call the Federal Loan Consolidation Information Call Center at 1-800-557-7392. Set aside at least 30 minutes to complete the application and have all loan information handy.

  3. Decide on a repayment plan – See what your monthly payments would be on each payment plan with Federal Student Aid’s Repayment Estimator. You can also call your loan servicer and ask which plan will save you the most money over time or give you the lowest monthly payment.

  4. Start paying it off – If you’re past your six-month, post-graduation grace period, repayment of your new direct loan will start within 60 days. Your servicer will contact you with your first payment due date and instructions for submission. Be sure to keep paying on your old loans until you have confirmation that they have been zeroed out. 

Still have questions about consolidation - read more here.

Published in: Consolidate

About the Author
Sheryl Nance-Nash

Sheryl Nance-Nash is a freelance writer based in New York City. She specializes in personal finance, business, small business, and travel topics. Her articles have appeared in Money, Newsday, The New York Times,,,,, among others. When she's not writing about retirement, taxes, student loans, credit, debt, and everything under the personal finance umbrella, she writes about businesses—big and small—their victories and the challenges they face. Sheryl is married with a grown daughter. Her favorite pasttime is traveling. She loves chronicling her adventures and exploring new places and cultures. Read more by Sheryl Nance-Nash

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