The Benefits of a Direct Consolidation Loan and Your Eligibility

Do you lose track of monthly bills and payment schedules? A Direct Consolidation Loan makes it easy to manage your finances and borrowers may even save money. Get organized and stay on top of monthly payments with the additional payment options offered through a Direct Consolidation Loan. Learn about what qualifying individuals receive from a Direct Consolidation Loan.

How You Benefit from a Direct Consolidation Loan

Work with the U.S. Department of education to organize and manage your finances. A Direct Consolidation Loan offers:

  • The ability to transform one or more Federal education loans into a single loan with more advantages. You will have only one lender for your new Direct Consolidation Loan that can account for multiple Federal education loans.
  • Flexible repayment plans to choose from and the ability to switch plans at any time. There are plans that adjust the monthly payment on a borrower’s income. These plans are created to meet your changing needs.
  • Free consolidation. There is no fee or minimum amount required to qualify.
  • The potential to pay less on monthly payments. A borrower’s monthly payment may be lowered as the minimum monthly payment on direct consolidation loans can be lower than combined payments on a borrower’s Federal education loans. You can make necessary payments on a Direct Consolidation Loan and pay less.
  • Continuation of subsidy benefits from subsidized loans. A Direct Consolidation Loan is composed of 2 possible areas: Subsidized and Unsubsidized. Subsidy benefits continue for most subsidized loans that are rolled into the subsidized area of this loan.

FFEL Loans, PLUS Loans, Perkins Loans and some health profession loans may be consolidated into a Direct Consolidation Loan with some exceptions or additional terms. A single payment that can potentially be less than current multiple loan payments and be aligned with your budget is available with a Direct Consolidation Loan for those that qualify.


How to Determine Eligibility

Certain requirements must be met to afford potential borrowers the ability to exchange their multiple loans with multiple lenders to one payment with the U.S. Department of Education. For those that seek to apply for a Direct Consolidation Loan, they must have meet the following criteria:

  • Have a minimum of one Direct Loan or FFEL (Federal Family Education Loan) Loan in grace or repayment status. Repayment status also covers loans in a forbearance or deferment period.
  • Make satisfactory repayment arrangements with current loan holders on the majority of defaulted federal education loans or agree to repay them with an Income Contingent Repayment Plan or Income Based Repayment Plan under their new Direct Consolidation Loan.

Some situations are not accepted for Direct Loan Consolidation. Any loans in in-school status are not eligible. Those that are married cannot consolidate individual Federal education loans into one Direct Consolidation Loan listing them as joint borrowers.

What are the Payment Plan Options

The Direct Consolidation Loan has 5 repayment plans available. Each plan has its own set terms, but borrowers can choose to change plans as needed. Borrowers can select the:

  • Standard Repayment Plan
  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Income Contingent Repayment Plan (ICR) and
  • Income-Based Repayment Plan (IBR).

Borrowers have a range of options that can suit their individual needs and budgets. Manage your student debt with A Direct Consolidation Loan.


Last modified: January 4, 2018

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