Consolidation Loans

A Consolidation Loan is designed to help student and parent
borrowers simplify loan repayment by allowing the borrower to combine several types of federal student loans with various repayment schedules into one loan. You can even consolidate just one loan into a Direct Consolidation Loan, in order to get benefits such as flexible repayment options. If you have more than one loan, a Consolidation Loan simplifies the repayment process because you make only one
payment a month. Also, the interest rate on the Consolidation Loan might be lower than what you're currently paying on one or more of your loans. And if you're in default* on a federal student loan, you might be eligible for a Consolidation Loan if certain conditions are met. Both the Direct Loan Program and the FFEL Program offer
Consolidation Loans. Direct Consolidation Loans are available from the U.S. Department of Education. FFEL Consolidation Loans are available from participating lenders such as banks, credit unions, and savings and loan associations.

Note that a lender may not refuse to consolidate your loans because of

• the number or type of loans you want to consolidate.
• the type of school you attended.
• the interest rate you would be charged on a consolidation loan.
• the types of repayment schedules available to you.
  

What is the interest rate on a Consolidation Loan?
As of February 1, 1999 the interest rate for both Direct Consolidation Loans and FFEL Consolidation Loans became a fixed rate for the entire time you are repaying the loan. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. By law, the interest rate will never exceed 8.25 percent.

Prior to February 1, 1999 Consolidation Loans had variable interest rates. For information on interest rates for Consolidation Loans made prior to February 1, 1999, check with the Loan Origination Center's Consolidation Department at the number listed on page 22 if you have a Direct Consolidation Loan or with your lender if you have a FFEL Consolidation Loan.

Go on to Direct FFEL Loans Page 22 - Direct Consolidation Loans Page 24 - FFEL Consolidation Loans Page 25