Consolidation Loans

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There are two types of Consolidation loans, FFEL (Federal Family Education Loans) and Direct Consolidated Loans. Often but not always, when viewing the loans in the NSLDS (National Student Loan Data System,) the subsidized and unsubsidized portions of the loans are delineated as two separate consolidated loans.

Consolidating loans does not always benefit the borrower (see above). Consolidation also refers to refinancing Federal Loans with a private lender.

Here are some of the eligibility requirements for receiving a Direct Consolidation Loan:

1. The loans you consolidate must be in repayment or in the grace period.

2. Generally, you cannot consolidate an existing consolidation loan unless you include an additional eligible loan in the consolidation.

3. Under certain circumstances, you may reconsolidate an existing FFEL Consolidation Loan without including any additional loans. These circumstances are explained in the entry: Federal Direct Consolidation Loan Application and Promissory Note.

4. If you want to consolidate a defaulted loan, you must either make satisfactory repayment arrangements (defined as three consecutive monthly payments) on the loan before you consolidate, or you must agree to repay your new Direct Consolidation Loan under the Income-Based Repayment Plan, Pay As You Earn Repayment Plan, Revised Pay As You Earn Repayment Plan, or Income-Contingent Repayment Plan.

5. If you want to consolidate a defaulted loan that is being collected through garnishment of your wages, or that is being collected in accordance with a court order after a judgment was obtained against you, you cannot consolidate the loan unless the wage garnishment order has been lifted or the judgment has been vacated.

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