Consolidating loans through direct loans

Refinancing your loans can lower your interest rate and your monthly payment.

Federal loan consolidation can lower your monthly payment if you extend your loan term, but stretching out payments over a longer time period without an interest rate reduction can increase overall repayment costs.

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Like many federal loan borrowers, you may have both FFEL and Direct Loans. Once these loans are consolidated, you will have repayment options, some which lower your monthly payments, from which to choose. Consider the advantages and disadvantages carefully before you act.

Once you consolidate, you are locked into a loan with a fixed interest rate. Therefore, if you consolidate your variable interest rate loans and the interest rates drop the following year, you have "locked" into the higher interest rate for the life of the loan.

Consolidating loans with a private lender (refinancing) disqualify those loans from all federal IDR plans. Any eligible federal loans can be combined in a direct federal consolidation loan, regardless of who the loan servicer is.

Most federal student loans are eligible to be combined into a federal Direct Consolidation Loan, including: Keep in mind that when refinancing with a private lender, you lose federal borrower benefits such as access to income-driven repayment programs, forbearance, or deferment, and the potential to qualify for loan forgiveness after 10, 20 or 25 years of payments. If you have private loans they are not eligible for federal loan consolidation.

If you answered “yes” to all of these, you might want to look into consolidating your loans.

If you’re more concerned about lowering your interest rate, private student loan consolidation, or refinancing, might be the better option for you.No Extra Costs There are no application or processing fees and there are no prepayment penalties.Visit the Federal Student Loan Consolidation Webpage for more information. You should know the interest rate, fees and terms before you sign any agreement.According to the Department of Education, you cannot consolidate a loan with the federal government that’s already been consolidated, unless you add on an additional, existing eligible loan or loans.You can refinance loans with private lenders as often as you would like.If you have several federal education loans, you may want to consider combining them into one new loan with one monthly payment.