Federal Loan Consolidation

Students who have more than one federal student loan may want to consider combining the loans into one Direct Consolidation Loan. Consolidating different types of loans into one monthly payment can help borrowers better manage their loan repayment. But loan consolidation isn’t right for everyone. Weigh all of the information before you choose to consolidate.


A Direct Consolidation Loan combines one or more federal loans into a single loan with one interest rate and one monthly loan payment.

Borrowers can:

  • Combine loans of different types into one fixed-rate loan (even consolidate a single, small-balance loan)
  • Have more than one consolidated loan 
  • Choose the same repayment term as they have with a current Direct Loan to keep borrowing costs low at repayment
  • Consolidate a Parent PLUS Loan. (Parent PLUS loans cannot be consolidated with federal loans borrowed by students)
  • Apply for Direct Loan consolidation online at no cost
  • Receive an interest rate reduction if using an Electronic Debit Account for payment

Some of the drawbacks include:

  • By extending the repayment period, a borrower is likely to pay more interest over the life of the loan. The total loan cost will be higher
  • Giving up the benefits of some individual loans, such as the forgiveness and deferred interest benefits of the Perkins Loan
  • Private educational loans cannot be included in a federal loan consolidation (to learn how to consolidate private loans, contact your private loan lender)

Rehabilitation vs. Consolidation:  There are benefits to rehabilitating a defaulted loan BEFORE consolidation.

  • If you consolidate a defaulted loan without rehabilitating it:
    • A borrowers credit record will continue to show that the loan was in default but then “paid in full”
    • This can remain on the credit report for up to seven years
  • Rehabilitating a defaulted loan BEFORE consolidating it:
    • Rehabilitating a defaulted federal loan requires the borrower to make at least nine full payments of an agreed amount
    • After the borrower rehabilitates the defaulted loan, the loan holder will update the credit report to no longer reflect the default status

More information about considering loan consolidation can be found on the Federal Student Aid website or use the federal loan estimator.


The fixed interest rate of a consolidation loan is the weighted average interest rate on all the loans you are consolidating. See the federal Direct Consolidation Loans web page for more information.

Remember that if you consolidate your Perkins, Health Professions, or Nursing Loans, you will lose the cancellation provisions of these loans. This could be disadvantageous for certain students, such as those who plan to serve in the Armed Services or Peace Corps.  For information about Perkins Loan cancellation, see the federal publication Your Federal Student Loans: Learn the Basics and Manage Your Debt. For information about Health Professions Loan and Nursing Loan cancellation, see your promissory note.


The easiest way to apply is online through the studentaid.govwebsite using your U.S. Department of Education FSA ID. You can request a paper application by calling 1-800-557-7392.

Sign in at studentaid.govand either go to the My Account page to access the Loan Consolidation link or find the link under the Tools and Resources on the Home page. During the consolidation process, you will:

  • Select a loan servicer: FedLoan/PHEAA, Great Lakes, Nelnet or Sallile Mae. This will be the servicer throughout the life of your consolidated loan. 
  • Select specific loans you wish to consolidate and choose your repayment plan: If you choose an income-based repayment option, you may allow the IRS tax database to populate this section or retrieve IRS information and enter it manually. (For more about repayment plans, visit the Repaying Your Student Loans page.)
  • Read and approve Terms and Conditions.
  • Submit personal information and two references.
  • Review a summary of consolidated loans and sign your promissory note.

What you will need:

  • Name, address, and phone numbers for two references with different U.S. addresses
  • Lender name, address, and current balance information for each education loan to be considered for consolidation. (If applying online, much of this information will be pre-populated. The View Student Loan Summary page of Wolverine Access also lists this information. (After logging in, select Financial Aid > Aid Year > Loans > View Student Loan Summary.)  You may also refer to your monthly Direct Loan statements, your Direct Loan Servicer account information or your promissory notes.
  • For the "Education Loan Indebtedness" section, list the following for each of your loans: loan holder, loan servicer's name, address, and telephone number. (You may list private education loans to have them considered, but these loans cannot be consolidated with your federal loans.) 
  • For federal Direct Loans (Subsidized, Unsubsidized, and PLUS) the Direct Loan Servicer contact information is shown on your most recent Direct Loan statement. Also find this at the NSLDS website. Log in with your FSA ID.
  • For federal Perkins, Health Professions, and Nursing Student Loans you have had while at University of Michigan, list:

Student Loan Operations (Loans & Collections)
University of Michigan
6061 Wolverine Tower
3003 S. State Street
Ann Arbor, MI  48109-1287

You may receive mail from private loan companies offering consolidation loans.  Many of these solicitors use language implying that they are government-operated entities. They are not. These companies obtain your name from credit-reporting agencies such as Equifax, Experian or TransUnion. You may stop them from sending these offers by visiting OptOutPrescreen.com and complete the opt-out process. For more information, see Privacy Choices for Your Personal Financial Information on the Federal Trade Commission website or visit the FTC's student loans page.