To be eligible for Federal Loan Consolidation, borrowers must have at least one loan from the Federal Direct Loan program or Federal Family Education Loan (FFEL) program that is not in an “in-school” status.Defaulted loans may be consolidated in certain circumstances.However, if a borrower was receiving a loan discount or “borrower benefit” from a FFEL program lender, the borrower may lose that benefit upon consolidation since the discounts are not provided by the promissory note.
Because there are no penalties for prepaying the loan in full or in part, borrowers may make larger monthly payments or extra payments if they wish.
Borrowers may also change repayment plans at least once a year.
Married borrowers may not consolidate their loans together, nor may a student’s Direct Loans be consolidated with the parent’s Parent PLUS Loan.
(A parent who has a Parent PLUS Loan borrowed to pay for a child’s education and a Direct Loan borrowed to pay for the parent’s education may consolidate those loans together.) Previously, married borrowers could consolidate their loans together.
Borrowers with an existing federal consolidation loan may consolidate again in a few circumstances: Note that reconsolidating a federal consolidation loan does not relock the interest rate.
The first payment on a federal consolidation loan is due no more than 60 days from the date of disbursement.If the credit scores have improved significantly, this may lead to a lower interest rate, potentially saving the borrower money.If a borrower’s private student loans were obtained with a cosigner, and the private consolidation loan does not involve a cosigner, consolidating the private student loans releases the cosigner from his/her obligation. However, since the interest rates on a private student loan usually depend on the higher of the borrower’s and cosigner’s credit scores, this may lead to an increase in the interest rate on the private consolidation loan, unless the borrower’s current credit score is better than the cosigner’s previous credit score.The private consolidation loan has a new interest rate based on the borrower’s (and cosigner’s) current credit history.This interest rate may be higher or lower than the weighted average of the current interest rates on the borrower's private student loans.Previously, the interest rate would have been capped at 8.25%.