Federal
Loan Consolidation

Federal Loan Consolidation can save you from the stress of bills, debt collectors, and the nagging thoughts of foreclosure or even bankruptcy. A federal loan consolidation can drastically change your life for the better within weeks, months, or years depending on your current debt situation.

The Higher Education Act (HEA) provides for a loan consolidation program under both the Federal Family Education Loan (FFEL)Programs and the Direct Loan Program. Under these programs, a borrower’s loans are paid off and a new consolidation loan is created.

These programs simplify loan repayment by combining several types of Federal education loans (that may have different terms and repayment schedules or may have been made by different lenders)into one new loan.

The interest rate may be lower than on one or more of the underlying loans. In addition, the monthly payment amount on a consolidation loan is usually lower and the amount of time to repay may be extended beyond what was available in the separate loan programs. These features should result in more manageable debt and should make borrowers less prone to default.

When a borrower consolidates loans in the Direct Consolidation Loan Program, the Department of Education pays off the original federal education loans and originates a new loan for the total amount of the loan(s) consolidated.

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