College students with multiple federal student loans understand from experience the organizational nightmare involved with making payments on a set of different loans. However, students may not know that making payments on multiple federal student loans may be costing them money in the short-term as well.

To make payment plans easier to manage and potentially lower student loan debt, college and university students should consider consolidating their federal student loans into one, easy to manage federal Direct Consolidation Loan.

This article will introduce students to federal student loan consolidation, explain the benefits students may receive from consolidating their loans, and detail which federal student loans are eligible.

Should a Borrower Pursue Federal Student Loan Consolidation?

Borrowers should consider several issues when thinking about consolidating their federal student loans. Use the guide below to determine if federal student loan consolidation appears to be a sound option for lowering one’s student loan debt:


  • Monthly payment problems – borrowers who have difficulty making their monthly payments should consider a Direct Consolidation Loan in order to avoid defaulting. When student loans are consolidated, payment plans can be extended, lowering monthly payments as well as short-term debt.
  • Inconvenient monthly payments – those with multiple federal student loans are well aware of how difficult it can be to keep track of everything. If a borrower feels unduly stressed by the organizational efforts needed to make payments on multiple loans, consolidating the loans for the sake of convenience may be advisable. Rather than making payments to various lenders, both public and private, students who consolidate will have one lender to pay: the U.S. Department of Education.
  • Unstable interest rates – many borrowers hold loans with variable interest rates that can fluctuate unpredictably. For borrowers who would like more predictability for both their fiscal and mental well-being, consolidation can help. Consolidated federal student loans have a fixed interest rate, which is set by averaging the rates of the various federal loans held by a borrower.
  • Long-term payments – borrowers who are considering consolidating their loans for any of the above reasons should keep in mind that extending the time one takes to pay off a loan increases the overall amount a borrower ends up paying. This is due to accumulated interest rates over an extended number of years.
  • Loans nearly paid off – borrowers who are close to paying off multiple federal student loans should, in most cases, refrain from consolidating them, as the effort to do so may not yield much in the way of a return.

For those students who find, upon reviewing the above items, that consolidating their student loans makes sense, the next section details some of the benefits.

The Benefits of Federal Student Loan Consolidation

There are several advantages to consolidating multiple federal student loans into a singe, Direct Consolidation Loan. These include:

  • Having a single lender – debt management is not just about acquiring the funds necessary to pay off one’s loans, but includes keeping proper records and the maintenance of sound financial systems. For some students, organization becomes a stumbling block regarding paying off student loans, even when ample funds are available to do so. By consolidating loans, students can manage their debt easier by being responsible to a single lender and a single monthly payment.
  • Multiple payment plans – borrowers who consolidate their federal student loans are able to choose from various payment plans (including a Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, and an Income Contingent Repayment Plan).
  • No minimum amounts or fees – there is no fee for consolidating student loans, nor is there a minimum amount students must borrow in order to qualify.
  • Loan deferment – borrowers who consolidate their federal student loans may have extended deferment options, even if they had previously exhausted such options.
  • Lower monthly payments – whether a borrower’s monthly payment decreases as a result of a loan consolidation is entirely dependent upon which payment option was chosen. However, most students can find a lower payment option from those offered by a Direct Consolidation Loan.
  • Subsidies – borrowers can have both subsidized and unsubsidized student loans. For those who consolidate their federal student loans into a single loan, subsidy benefits remain in place, despite sometimes having a hybrid compilation.

It’s important to note that students who choose a payment plan which extends the life of a loan will lower their monthly payments in the short term while increasing the overall amount which must be paid off in the long term.

Loans Eligible for Federal Student Loan Consolidation

Two primary federal student loan programs exist: the Federal Direct Student Loan Program (FDLP, or Direct) and the Federal Family Education Loan Program (FFEL). Both programs fund Stafford loans and PLUS loans, the two largest federal student loans. However, while Direct loans are offered through the Department of Education, FFEL loans are backed by the government and offered by private lending companies (such as Sallie Mae, Chase, and Wells Fargo).

Both Direct and FFEL loans are eligible for federal student loan consolidation. However, students should note that they are only eligible to consolidate the loans once they have either graduated or left school.

For more information on federal student loan consolidation, reference Federal Student Aid’s website, from which the information for this article was gleaned.