Loan Consolidation allows you to simplify the repayment process by combining several types of federal education loans into one loan, so you make just one payment a month. Also, that monthly payment might be lower than what you’re currently paying.
You can get a Direct Consolidation Loan, or a Federal (FFEL) Consolidation Loan, available from participating FFEL lenders. Under either program, the loan holder pays off the existing loans and makes one consolidation loan to replace them. If you have subsidized and unsubsidized loans, they’ll be grouped accordingly when you consolidate so you won’t lose your interest subsidy on the subsidized loans.
There are three categories of Direct Consolidation Loans: Direct Subsidized Consolidation Loans, Direct Unsubsidized Consolidation Loans, and Direct PLUS Consolidation Loans. If you have loans from more than one category, you still have only one Direct Consolidation Loan and make only one monthly payment.
You can also consolidate Federal Perkins Loans and other federal education loans. Debt consolidation firms can help guide you as to what the best type of consolidation is for you. If you have loans from private lenders, a debt consolidation firm may be able to negotiate lower interest rates so your monthly payment is less.