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What are the benefits of a Consolidation Loan?

Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

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What are the benefits of a Consolidation Loan?

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  1. What are thebenefitsof a ConsolidationLoan? Direct Consolidation Loansallowborrowers to combine oneor more of theirFederal education loansintoanewloan that offers several advantages. One Lenderand OneMonthlyPayment Withonlyone lenderand onemonthlybill, it is easier thanever for borrowers to manage theirdebt.Borrowers have onlyone lender,the U.S. Department ofEducation,forall loans included ina Direct Consolidation Loan. Flexible RepaymentOptions Borrowers can choosefrommultiple plans to repaytheirDirect ConsolidationLoan, includinganIncomeContingentRepaymentPlan.Theseplansaredesigned to beflexible to meetthe differentandchanging needs of borrowers.WithaDirect ConsolidationLoan,borrowers can switchrepaymentplansatanytime. NoMinimum or Maximum LoanAmounts There is nominimum amount requiredtoqualifyfor aDirect ConsolidationLoan! Varied DefermentOptions Borrowerswith Direct ConsolidationLoansmayqualifyfor reneweddefermentbenefits. If borrowers have exhaustedthe defermentoptionsontheircurrentFederaleducation loans,a Direct Consolidation Loanmayrenewmanyof those deferment options. In addition, borrowers maybe eligiblefor additional defermentoptions if theyhave an outstanding balance on aFFEL Program loan madebefore July1, 1993, when they obtain theirfirst DirectLoan. Reduced MonthlyPayments A Direct ConsolidationLoanmay easethestrain on aborrower’s budgetbylowering the borrower’s overallmonthlypayment.Theminimummonthlypaymentona DirectConsolidationLoanmaybe lower than the combinedpayments chargedona borrower’sFederaleducationloans. Retention of SubsidyBenefits There aretwo (2) possible portions to aDirectConsolidation Loan:SubsidizedandUnsubsidized. Borrowers retaintheirsubsidybenefitson loans thatare consolidated intothe subsidized portionof a Direct Consolidation Loan.

  2. TemporaryIn-School ConsolidationAuthority During aone(1) year period,borrowers who meet certain requirementsmay consolidateloansthatare in anin-school statusintoaDirect ConsolidationLoan. Direct ConsolidationLoansmaybe madeunder thistemporaryprovision toborrowerswhose consolidationapplications arereceived on orafter July1,2010 andbeforeJuly1, 2011. Borrowerswill losethegraceperiod ona FFEL Subsidized/UnsubsidizedStafford Loan or Direct Subsidized/Unsubsidized Loan byconsolidatingtheloan while it is in an in- school status. Similarly, PLUSborrowers whoconsolidatea FederalPLUS Loanor Direct PLUS Loan thatwas first disbursed onor after July1, 2008 will losethe six(6)monthpost-enrollmentdeferment period.Parent PLUS borrowerswho consolidate a Federal PLUS Loan orDirect PLUS Loan thatwas firstdisbursed onor after July1, 2008 will lose eligibility todefer repayment while the studentfor whomthe loan was obtained is in school.Click herefor information on theeligibilityrequirementsfor this temporaryprovision. For moreQuestionsyoucancontactTheStudentLoan Help Center.

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