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.
How to apply
Apply through the StudentLoans.gov website.
It is critical that you continue making payments, if required, to the holders or servicers of the loans you want to consolidate until your consolidation servicer informs you that the underlying loans have been paid off.