Interest and Consolidation

Student Loan Consolidation

Why should I consolidate?

A consolidation loan allows you to combine your federal
student loans into a single loan with one monthly payment,
which can be lower than the payment required under the
standard 10-year repayment option.  The consolidation loan
interest rate is set as the weighted average of the interest rates of the loans being consolidated (rounded up to the next 1/8%) and is fixed for the life of the loan. 

Note:  Although loan consolidation can simplify and lower
your monthly payments, you should keep in mind that it
also can increase the total cost of repaying your loans. By
paying back your loans over a longer period of time (up to
30 years), you are charged more interest and end up paying
more.  Also keep in mind that consolidation may affect your
grace period and deferment and cancellation options.  Be an
informed consumer!

How do I consolidate?

To find out more about a Direct Consolidation Loan program, go to  For information about the FFEL Consolidation Loan program, contact a participating FFEL lender directly.  Check your loan documents for your lender’s toll-free customer assistance contact number. Get all the information before making your decision.

Where do I go to find out more?

If you are uncertain of your current lender(s) or loan servicer(s), you can get information about your student loans by going to or by calling the Federal Student Aid Information Center (FSAIC): 1-800-4-FED-AID (1-800-433-3243).

For more information about loan repayment or consolidation, go to and click on “Repaying.”

Federal Student Loan Interest Rate and Consolidation Fact Sheet

Below are the new interest rates, effective July 1, 2007 to June 30, 2008, for Stafford and PLUS Loans in the Direct
Loan and Federal Family Education Loan (FFEL) Programs, for loans disbursed between July 1, 1998 and June 30, 2006.    

Direct FFEL Loans

Loan Type
After July 1
Now 1
After July 1st
Non-Subsidized Stafford Loan ( Forebearance)
Subsidized Stafford Loan (In School)
Subsidized Stafford  (Forebearance)
Subsidized Stafford (In-school)
PLUS Loans (All)

Note: For all Stafford loans first disbursed on or after July 1, 2006, the interest rate is fixed at 6.8 percent. For PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed at 7.90 for Direct PLUS Loans and 8.50 percent for FFEL PLUS Loans.  This change from a variable to a fixed interest rate does not affect a borrower's variable interest rate on loans made before July 1, 2006.

If you consolidate your loans you “lock in” the interest rate on the loans being consolidated.  For Direct Consolidation Loans, if the application is postmarked or received electronically by midnight June 30, 2007, the Direct Consolidation Loan will be made using the current interest rates.  For FFEL Consolidation Loans, lenders are authorized to use this same guidance. If you are interested in consolidating with a FFEL Program lender, contact the lending agency to find out about their deadlines.

What are the different kinds of loans?

The Direct Loan Program provides loans directly from the U.S. Department of Education to students
and their families. FFEL Program loans are subsidized by the U.S. Department of Education and are provided by private lenders to students and their families. Stafford Loans are student loans made through
the Direct Loan and FFEL programs. PLUS Loans are loans that parents can take out
for the educational expenses of their dependent undergraduate children. PLUS Loans are made through both the Direct Loan and FFEL programs.
Graduate/Professional PLUS Loans will be  available for loans certified on or after July 1, 2006; the terms and conditions that apply to parent PLUS borrowers also apply to these students borrowers.

The information on this site was produced by the US Dept. of Education and has been compiled by the site owners. We are not responsible for accuracy or completeness. Site design (c)2007

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