Consolidating Federal Student Loans
Students are able to consolidate their federal student loans,
including Direct, Stafford, and Perkins loans, into a Direct
Consolidation Loan. The consolidation is processed by the Federal
Direct Loan Program which is the servicing agency for Federal Direct
The interest rate for your Direct Consolidation loan will be a fixed
rate and the rate is determined by the weighted average of the
interest rates on the loan(s) being consolidated, rounded to the
nearest higher one-eighth of one percent.
Most of the deferment provisions of Federal Direct loans are
retained for Federal Direct Consolidation loans including:
* In-school deferments;
* Graduate fellowship
* Rehabilitation training;
* Economic hardship; and
There is no fee involved with loan consolidation!
What are the
interest rates for a Federal Student Consolidation Loan?
By consolidating your education loan(s) your interest rate will be a
fixed rate and is determined by the weighted average of the interest
rates on the loan(s) being consolidated, rounded to the nearest
higher one-eighth of one percent.
For loans first disbursed on or after July 1, 1998, and through June
30, 2006, the consolidation loan fixed interest rates for Direct
Student Loans and Stafford Loans, effective July 1, 2006 through
June 30, 2007, are as follows:
6.625% - during grace, and deferment periods;
7.250% - during repayment period.
(Note that borrowers are no longer able to consolidate their loans
If you have federal loans with more than one interest rate, for
example a Direct Loan and a Perkins Loan, use the on-line
interactive calculator at www.loanconsolidation.ed.gov (click on
Borrower services) to determine the weighted average interest rate
and to see what your monthly payments might be under the four
Student borrowers may reduce their Direct Consolidation loan
interest rate by an extra 0.25 percent by electing to pay their
monthly payments through Electronic Debit Accounts (EDA). This means
that you authorize the payments to be made out of your checking
account. Using EDA would ensure "on time" payments and should be
considered by every borrower entering loan repayment. If you are
interested in Electronic Debit Accounts, please contact Borrower
Services at 1-800-848-0979 or visit their web site at
When should one apply for a Direct
You may apply for a Direct Consolidation loan at anytime, however,
keep the following in mind:
1. If you currently have a variable interest rate loan, be aware of
the annual changes to the interest rates. These occur on July 1. If
the rate is expected to be higher on July 1, plan to apply for a
consolidation loan prior to June 30. If the rate is expected to be
lower on July 1, plan to apply after the rate changes. We are
notified of the rate changes by June 1 and we post these changes on
this web site.
2. If you have a six month grace period on your loan(s), it may make
sense to hold off on consolidating until 45 days prior to the end of
the grace period. The grace period rate is lower than the repayment
period rate. Consolidation loans do not have grace periods so if you
apply too early during your current loan's grace period, you run the
risk of having your first payment be due before your grace period
ends. By waiting until the latter part of your grace period you will
receive most of your grace period and still receive the lower rate.
How to apply for a Direct Consolidation Loan?
If you have any questions about applying for a Direct Consolidation
loan, call the Loan Consolidation Center at 800-557-7392. The Center
is open Monday through Friday, 8AM to 8PM (EST). The staff at the
Center are able to answer your questions about the loan
consolidation process or if you need further assistance.
If you only have William D. Ford Federal Direct loans, you may
APPLY OVER THE PHONE. Call the Loan Consolidation Center at
800-557-7392. (Note that if you entered Hampshire beginning in Fall
1995 or after, your federal student loans have been William D. Ford
Federal Direct loans.) Choose the option to speak with a customer
service representative (option #4). State that you only have Direct
loans and that you want to apply over the phone. You will be asked
some basic personal information. A promissory note will then be sent
to you to sign. Sign and return the promissory note as soon as
APPLY ON-LINE at www.loanconsolidation.ed.gov (Click on
Borrower Services). If you have a federal PIN number you are able to
sign the promissory note electronically. This is the fastest way to
process your Direct Consolidation loan. If you do not have a PIN
number, you may complete the application on-line and then print out
the promissory note or request to have a promissory note sent to you
to sign and return. You may also request a PIN number at this same
APPLY USING A PAPER APPLICATON FORM. You may call the Loan
Consolidation Center at 800-557-7392, to request a paper application
(option #1). You may also print a copy at
Note that if you have Stafford and/or Perkins loans to consolidate
with your Direct loans, you need to either apply on-line or by
Information you will be asked to provide for a Direct
Consolidation Loan application
If you plan to apply via the on-line or paper application for a
Direct Consolidation loan, you will need to provide loan account
1. Loan holder: if your loan is a William D. Ford Direct
Loan, your loan holder is the Direct Loan Program, PO Box 4609,
Utica, NY 13504; phone: (800) 848-0979; if you have other federal
loans, refer to the correspondence you receive from each lender.
2. Loan type: on the on-line and paper versions, use Code ‘D’
for subsidized Direct loans; use Code ‘L’ for unsubsidized Direct
loans; for other types of loans, refer to the charts provided on the
web site or with the paper application.
3. Account number: your social security number is your loan
4. Current balance: use the original loan amounts for
subsidized loans; do the same for unsubsidized but if you have not
been paying the interest, call Borrower Services (800-848-0979) to
get an accurate balance. You may simply list the total of subsidized
and the total of unsubsidized loans instead of listing numerous
separate loans. For example, if you have five separate loans
totaling $16,000 ($8000 in subsidized loans and $8000 in unsub
loans), you may list just two loans (sub & unsub of $8000 each)
instead of the five. If you need to determine the types and amounts
of your loans call Borrower Services at 1-800-848-0979.
5. To be consolidated: List all loans and indicate which are
to be consolidated. Including all loans, even if not to be
consolidated, will help in determining loan terms for extended and
graduated repayment plans.
Call the Loan Consolidation Center at 1-800-557-7392 with questions
regarding loan consolidation.