• FFEL Consolidation Loan—You (or your parents, for a FFEL PLUS Consolidation Loan) can contact the consolidation department of a participating lender for an application and more information. If the same FFEL loan holder holds all the loans you want to consolidate, you should obtain your consolidation loan from that loan holder.
• Direct Consolidation Loan—You (or your parents, if they want a Direct PLUS Consolidation Loan) can contact the Direct Loan Origination Center’s Consolidation Department.
To get a consolidation loan, you must consolidate at least one Direct Loan or one FFEL Loan. (For example, if you have only Federal Perkins Loans, you can’t get a consolidation loan.) If you don’t have a Direct Loan, but you have an FFEL Loan, you must first contact your FFEL lender about getting a FFEL Consolidation Loan, before contacting the Direct Loan Consolidation Department.
Currently, the interest rate for both Direct and FFEL Consolidation Loans is a fixed rate for the life of the loan (unlike Direct and FFEL Stafford Loans, which have variable interest rates). The fixed rate is based on the weighted average of the interest rates on all of the loans you consolidate, rounded up to the nearest one-eighth of 1 percent. The interest rate will never exceed 8.25 percent for student loans and 9.0 percent for PLUS Loans.
Disadvantages to getting a consolidation loan:
Consolidation significantly increases the total cost of repaying your loans. Because you have a longer period of time to repay, you’ll pay more interest. In fact, consolidation can double total interest expense. So, compare.