Consolidating your federal direct student loans (Subsidized, Unsubsidized, Graduate PLUS and Federal Perkins) enables you to receive one monthly statement and to spread the payments over up to thirty years. Consolidation offers a way to decrease payments during years when earnings are less than they will be in the future. Be aware, however, that by paying loans over a greater period of time, the total amount of interest paid will increase. If you are able to pre-pay in early years, there is no pre-payment penalty.
When you consolidate your loans, you are getting a new loan and must sign a new promissory note for the Consolidation Loan. The interest rate on a Consolidation Loan is fixed based upon a weighted average of the loans you submit for consolidation. If you have already consolidated, it is not possible to decrease the interest rate by "re-financing." Using the weighted average on a fixed interest rate loan, with no new lower interest rate loans to include, the weighted average used to determine the interest rate would be exactly the same. In addition, in order to consolidate a second time, you must have at least one new loan to include.Please remember that alternative or private loans are not federal and cannot be consolidated.
Be sure that all federal loans are included by using NSLDS (National Student Loan Data System). Please keep in mind that only FEDERAL loans can be consolidated. Alternative Loans have a maximum payment period up to 25 years and must be paid separately.
For more information about loan consolidation:
Contact the Direct Loan Consolidation Center by calling 1-800-557-7392