There are two reasons to consolidate federal student loans:
- If you have FFEL Loans or Perkins Loans. FFEL and Perkins loans are not forgivable under Income-Based Repayment (IBR), Pay as Your Earn (PAYE) or Public Service Loan Forgiveness (PSLF). FFEL and Perkins loans may be "converted" to a Direct Loan (which is forgivable under the above programs) by requesting a Direct Consolidation Loan to "pay off" FFEL and Perkins Loans. To see if you have FFEL Loans:
- sign into www.NSLDS.ed.gov (using your Federal PIN).
- You will see a complete listing of your, each identified as one of the following: Direct, FFEL, or Perkins.
- If you have loans being serviced by a number of loan servicers and you would like the convenience of dealing with only one loan servicer. Your NSLDS records will identify the servicer for each of your loans.
The Direct Consolidation Loan process begins with an electronic application through which an applicant will:
- review and confirm loans for consolidation,
- select a repayment plan for the new consolidation loan.
Once the applicant submits his or her completed application, the consolidation servicer will:
- review the application,
- verify information about the loans the applicant wants to consolidate,
- pay off these loans, and
- begin to service the new consolidation loan.
An applicant will sign in to the studentaid.gov Web site and complete the Federal Direct Consolidation Loan Application and Promissory Note (collectively referred to hereinafter as the "application").
Key features of the electronic application on StudentLoans.gov include the following:
- A National Student Loan Data System (NSLDS) lookup will be performed, and information about an applicant's federal education loans will populate within the application. The applicant will have the opportunity to add loans to and/or remove loans from the information obtained from the NSLDS.
- An applicant who has at least one loan that is still in the grace period and wants to consolidate that loan will be able to delay processing of his or her application until closer to the end of the grace period.
- An applicant will choose the federal loan servicer that he or she wants to complete the consolidation.
Once an applicant submits his or her application electronically via studentaid.gov, the consolidation servicer will complete the actions required to consolidate the applicant's eligible loans. Key actions that the consolidation servicer will complete include the following:
- Review the application and follow up with the applicant as necessary to complete or correct information.
- Use the Federal Direct Consolidation Loan Verification Certificate to confirm with the current loan holder the eligibility and payoff amount of each loan the applicant wants to consolidate.
- Confirm with the applicant the loans that will be part of the consolidation.
- Pay off each eligible loan the applicant wants to consolidate.
- Determine the applicant's eligibility for the repayment plan selected in the application.
- Begin servicing the new Direct Consolidation Loan.
- Report the new Direct Consolidation Loan to the NSLDS.
The loan servicer will:
- Complete the Federal Direct Consolidation Loan Verification Certificate within 10 days of the date received.
- Report the underlying loan to the NSLDS as Paid In Full Through Consolidation once the payoff amount is received.
- Work with the consolidation servicer to resolve underpayments and overpayments