When you consolidate your federal student loans, you are actually taking a new loan called a federal direct consolidation loan. This new loan combines several federal student or parent loans into one larger loan, which replaces your original federal student loans. You usually won’t get a lower interest rate, but you will have a single monthly payment for your new federal direct consolidation loan, rather than making multiple monthly payments. Consolidation loans are available for most federal loans.

Consolidation loans provide access to several alternative repayment plans besides the 10-year repayment that is standard for federal loans. The most popular options include extended repayment, graduated repayment, and income-based repayment. 

Choosing to extend your repayment with your consolidation loan can reduce the size of your monthly payment. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan, you will pay more in interest over the lifetime of the loan.

TIP:  If you are having trouble repaying your loans, you should contact your servicer about Income-Based Repayment (IBR) before you enroll in an alternative payment plan that spreads your payments out over a greater period of time. Loans in the Income-Based Repayment program are eligible for loan forgiveness after 25 years and may be eligible for forgiveness after 10 years if you work in public service.