Apply for a Direct Consolidation Loan


When to apply

To apply for a Direct Consolidation Loan, your loans must be in a grace period or in repayment.

Grace period: Some student loans include a grace period of six or nine months before you are required to begin repaying them. This grace period begins the day after you stop attending school at least half time. For some loan types, the government pays the interest on your behalf during the grace period. Since your grace period ends once a consolidation is complete, you could be waiving (giving up) part of your grace period by consolidating during that time. This waiver is permanent-- you can't reverse it.

  • If you have variable interest rate loans, you may be able to obtain a slightly lower interest rate on your consolidation loan if you apply for the consolidation during your grace period. Be sure to check with the Direct Loan Program to see if you qualify for this benefit.
  • If you consolidate during the grace period, you may be able to delay the processing of the consolidation loan until shortly before the end of the grace period, giving you more time to benefit from the grace period when you are not required to begin payment.

You also can consolidate if your loans are in a deferment or default status, but some rules might apply.

  • Deferment: A deferment is a period of time during which your loan holder temporarily suspends your regular payments. If the loans you are consolidating are in an authorized deferment period, the deferment ends the day the consolidation is complete. If you are still unable to make payments at that time, you must reapply for a deferment after you consolidate. In some cases, you may not be eligible for the same types of deferment as you were before consolidation.
  • Default: If the loans you want to consolidate are in default, you must make special arrangements before the loans are eligible for consolidation:
    • Establish a satisfactory repayment arrangement with the loan holder.
    • The William D. Ford Direct Loan Program will set the number of monthly payments you'll be required to make before you can consolidate. The payments must be consecutive, voluntary, on time, and reasonable-and-affordable. A lump sum payment, tax offset, wage garnishment, or court-ordered payment will not count towards the required consecutive monthly payments.

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How to apply

Applying for a Direct Consolidation Loan is a multi-step process that might take four to six weeks to complete. Until the process is complete, you must continue making payments on the loans you wish to consolidate.

Generally, the loan application process works as follows:

  1. Complete a Direct Consolidation Loan Application and Promissory Note and submit it to the William D. Ford Federal Direct Loan Program.
  2. The Direct Loan Program or its servicer will send a Lender Verification Certificate (LVC) to the loan holder(s) listed in your application. The loan holder then completes the form and returns it to the Direct Loan Program or its servicer.
  3. Once the Direct Loan Program or its servicer has all of your LVCs, they will send you a repayment option letter. This letter includes the estimated principal balance, interest rate, and repayment period of your Direct Consolidation Loan. NOTE: You can cancel all or a portion of your Consolidation Loan at this time.
  4. The Direct Loan Program or its servicer will send payoff funds to your current student loan holder(s).
  5. You will receive a repayment schedule and disclosure statement. This document contains important information such as the consolidation balance and summary of your repayment terms, including your first payment due date. Shortly thereafter, you should receive a monthly billing statement for the Consolidation Loan.
  6. You have 180 days once the consolidation is completed to add any eligible loans you may have missed into the Consolidation Loan. Adding loans may change your repayment term and interest rate.

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