Consolidation is often the first step borrowers must take to enroll in some of the government’s more flexible repayment plans, including income-driven plans, many of which are restricted to borrowers with Direct Loans.Borrowers who graduated before 2010, when the government shifted to Direct Loans, for example, need to consolidate their loans to access the latest income-driven plan, Revised Pay As You Earn.Only federal student loans are eligible for consolidation.The interest rate is fixed for the life of the loan and based on the weighted average of the interest rates of each loan being consolidated.If you want to consolidate a loan that's in default, you have to either make satisfactory repayment arrangements with your lender or agree to repay it under one of the Department of Education's payment plans that tie payments to your income level. You'll need your Federal Student Aid personal identification number, or PIN, in addition to your personal information.If you don't already have a PIN, request one online at
Here are four things to consider before you make the leap.1. One of the myths of consolidation is that it makes your debt less expensive by lowering your interest rate.
There are no application fees for a direct consolidation loan and no prepayment penalty.
Once you finish your application, the loan servicer will complete the process.
Consolidating student loans can make educational debt easier to manage.
Instead of having to handle payments for a series of student loans, you'll have one single monthly payment that covers everything.