Facts Regarding The Direct Consolidation Loan

A direct consolidation loan allows a borrower to combine several federal student debts into one. By so doing, you’ll be able to make a single monthly payment instead of a multiple student loan payments. It is a short term consolidation opportunity offered by the United States Department of Education that started in January 2012.

There are number of benefits that accrue from this arrangement. The interest rates are lower and fixed, there is a longer period of time to complete the repayment and it is possible to rebuild damaged credit by consolidating defaulted student debts.

Types of direct consolidation loans

There are two types of direct consolidation loans: the traditional type and the special type. The two have several similarities as well as differences between them. In the traditional type, all debts are considered together under new terms.

The debts in the special type, on the other hand, are considered separately with each maintaining its original terms.

Borrowers that apply successfully for the traditional type have more time to repay which means that the monthly payments will be lower. In most cases, however, you’ll end up paying back much more.

The advantage of the special type is that since each debt is considered separately, the total interest rate is often lower. Both types are also eligible for a slight reduction in interest rates for borrowers that repay using the automatic debit system.

The application process is free. You can get more information and apply online at studentloans.gov. Alternatively, a copy of the application form and a promissory note can be mailed to you or you can simply call in for application assistance.

It is required that the repayment direct consolidation loans begins following disbursement. The first payment is expected within 60 days and you could be allowed up to 30 years to repay your loan. Deferment and forbearance are possible under special circumstances.

Most federal student loans are eligible for consolidation, including the following:

  • Direct Subsidized & Unsubsidized Loans
  • Subsidized & Unsubsidized Federal Stafford Loan
  • Direct PLUS Loans
  • Supplemental Loans for Students (SLS)
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Federal Nursing Loans
  • Federal Perkins Loans
  • Health Education Assistance Loans
  • and some existing consolidation loans

Points To Consider

You should carefully consider if a direct consolidation loan is the best option for your situation. Indeed, a loan consolidation can definitely simplify your loan repayment by consolidating your loans into one affordable monthly bill and can even allow you up to 30 years to repay your loans. You may also have access to additional repayment plans as well that could enable you to switch a variable interest rate loan to a fixed interest rate.

However, be aware that if you extend the length of your repayment period, you’ll also end up making more payments and paying more interest as a result. So be sure to make a side-by-side comparison of your current monthly payments and the amount your monthly payments would be if you do a loan consolidation.

One other important point to consider is any impact and loss of any borrower benefits that you may have had with your original loans. You might lose any borrower benefits from your original loans such as principal rebates, interest rate discounts, loan cancellation benefits or other. So you definitely want to consider all of these factors when weighing your options.

Carefully reevaluate your budget and income situation if you want to lower your monthly payment amount but are concerned about the impact of loan consolidation. Also consider other options such as deferment or forbearance for short-term payment relief.


Be advised that once you make the decision to combine your loans into a Direct Consolidation Loan, it is final decision and cannot be removed. All the prior loans that you consolidated will be paid off in full and no longer exist.

For more information on the Direct Consolidation Loan process, visit: studentloans.gov

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The direct consolidation student loan seems to be a great breather for candidates coming from diverse financial backgrounds. The families could really benefit from these kinda of schemes, with the pressure for repayments relaxed and the much needed time to decide on their future, offered to them.


As a college student with multiple loans, this looks like a great option. I’m always looking for anything that will help me pay off my debt.

David R

Managing student loans can be hell. So this is a great opportunity to simplify the process. At first glance, the traditional type may seem simpler, but the special type have the low interest rate going on for them.

Monica J.

I applied for student loan in my college too and I think it is a great opportunity for students. You shouldn’t miss it when you have opportunity waiting for you. As I work as a waitress, it really helps me financially and my parents don’t feel that I bother them much about money issue.

shirley tan

With this loan facility where the interests are lower, most students will be able to repay their loans. This is a welcomed move as most of them will start off with a low income. Consequently, they will be able to repay their loan as well as start their life as a working member of society with less stress…financially.

Felisa Dizon

I consolidated 4 loans together at a lower interest rate a few years after graduation and wish I had done it sooner. Made paying it easier too, although I’ll probably be paying until I’m 50!


With the current crisis in student loans, a debt consolidation loan is a step in the right direction. It has lower interest rates making repayment more affordable and sustainable.


Very interesting stuff and thanks for the informative post. This is information that loan agencies don’t make immediately available to us when we apply for student loans, so I’m happy to have come across your site as I was wondering about the specifics of debt consolidation.

Marie Joy Del Castillo

It is fortunate for Americans to have this kind of loan to assist somebody who is starting out to make a living. After graduation, one might need to relocate for better oppurtunities and the time frame being given to pay their loans is adequate enough to save up for it.

Michele Bourdo

This is good information. My daughter just graduated from college and will begin paying student loan debt back in a few months. Our hope is she’ll just make tons of money in her field and will never need to look at default or consolidation options, but knowing consolidation is a possibility if absolutely necessary is comforting.

GM Mehrab Rashid

With the rising expenses of education students sometimes need multiple student loans to pay for school or college, direct consolidation loan sounds like a dream merging them all together with lower interest rates. Who would want to miss out on this?? 😀


This is a desirable and fair process for students who get overwhelmed and/or have made some errors in financial management. Having a good credit score is essential in Life. You will have a hard time getting a mortgage, a car loan, a credit card (even a department store one!), or even finding an apartment to rent. As a landlord, I am amazed by the number of applicants who don’t realize that a “questionable” credit is a barrier for renting. It is a great idea to consolidate credit and improve your rating!


Direct consolidation student loan, is so far promising to consider. It gives the working class parents a chance to manage their monthly income and at the same time give their kids a good education.
The within “60 days first payment policy” is quite admirable, considering the borrower still need to attend other monthly bills, At least s/he has time to adjust whatever financial income s/he have.

Maureen Bongat

Money is one of the most difficult thing to manage nowadays. Good thing there is already this kind of arrangement when it comes direct consolidation loan. The alternative ways offered on paying this loans is sure a great help to debtors.


I have a direct consolidation loan. I had to take out two medium sized loans when I went to school to become a dental assistant. Altogether I pay 101.25 a month due to one loan being $65 & the other $35 and some change, I thought i was going to be paying at least about $400 a month something I definitely wouldn’t have been able to afford but I’m so glad I’m paying nowhere near that much. Shout out to direct consolidation loans!!!

Kevin Kwan

Forgive me if I am being very nitpicky but but in the 7th paragraph, the sentence repeats ‘at the” essentially saying “at the at the”. Direct consolation sounds like a very easy way to organize your loans and would be useful for those who may be lacking organizational skills. I am always wary of programs and such where debts and such are consolidated for you with promises of a lower interest rate. My gut feeling is that these are good for those who need help with organization or someone who needs someone else to handle most of their loan transactions. But that is just my opinion.


This is a smart way of ensuring that no loans are overlooked at on a monthly basis and all are settled within the allowable years of payment. This is indeed a very good option and is very worth considering.


Thank you for this very informative article. But I’m just wondering, how can you know exactly what type of borrower benefit you will lose when using direct consolidated loans?

Florence K. Wijaya

I think this is a much easier approach than to the income based repayment or rehabilitation program. It’s very suitable for the working class with minimum wage in the society nowadays. “Consolidations that are in default can be quicker than rehabilitating multiple loans” so I’ve heard.

Kevin Dimla

Education is really expensive nowadays that many of these student loan providers are just capitalizing on the dire needs of the students. Then, here comes graduation and employment wherein it won’t pay much that, you just end up working to clear your debt over a long period of time because, hello, interest is accruing. So there, at least they have come up with alternative terms on paying this loan.


Student loans are great especially if you need one. In my case taking another course would be a definite advantage since this will spell success and offset anxiety brought about by ignorance. Appreciation and contentment comes after a work is done based on studies. Loans will be a great help for persons with financial disabilities. This will help in getting quality courses needed in work solutions. Consolidation of loans will help simplify loan payments if not get a better choice on where your future budget will allow with great practical and financial cost benefit analysis to tackle higher education needed at work.

Rain Santos-Ocampo

Sounds like a good way to make sure you get your finances all sorted out. I wish I knew where to go to for direct consolidation loans in my country!


I think the direct consolidation loan will be beneficial for me in the long run. Least I wouldn’t have to worry about keeping track of each student loan if they will be consolidated into one. Also, anything that would lower monthly repayments (if it does indeed promise a lower interest rate), is good enough for me!


It states that it allowes debtors longer time to repay their loans for both types of schemes; special and traditional. However, it seems from the explanation 1 month after disbursement is not long.

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