Federal Student Loan Consolidation Tools and Tips

Federal student loan consolidation is sometimes necessary to take advantage of student loan forgiveness programs or income-driven repayment.

Written By: Michael P. Lux, Esq.

Last Updated:

Did you know?

Consolidation can cause your debt to temporarily double on your credit report.

This happens when the new loan is reported to the credit bureaus, but the old loans are not yet removed.

Servicer Selection

Federal consolidation is one of the few times that borrowers get to pick their loan servicer.

Borrowers considering PSLF should select MOHELA as they handle all of the PSLF applicants.

What is Federal Student Loan Consolidation?

  • In federal direct consolidation, the federal government creates a new consolidation loan for the borrower. The funds are used to pay off some or all of the borrower's federal loans.
  • For example, a borrower with multiple FFEL loans can consolidate the debt to create one new federal direct consolidation loan.

Why Consolidate?

  • Consolidation helps program eligibility. Through consolidation, borrowers can transform debt that isn't eligible for programs like Public Service Loan Forgiveness into eligible loans.
  • Notably, consolidation does not improve interest rates. When the loans are combined, the new loan gets the weighted average interest rate rounded to the nearest 1/8th percent.

You Should Know

Consolidation Tools

The Student Loan Sherpa's Complete Guide to Federal Direct Consolidation

The only place to consolidate is with the federal government.

The Big Consolidation Mistake for Parent PLUS Borrowers to Avoid

Servicer-Specific Consolidation Tips



The Latest News and Updates on Federal Student Loan Consolidation: