Direct Loan Consolidation in 4 Steps

If you have more than one direct loan to pay for your education, you may find that direct loan consolidation is a good repayment choice. Consolidating your loans will give you lower monthly payments by extending the time you have to repay the loan to up to thirty years. However, keep in mind that this also means you will make more payments and pay more interest. Once you have determined that direct loan consolidation is right for you, there are four basic steps you will need to follow to complete the process.

Things Needed to Apply for Consolidation

There are a few things you will need to have or before you apply. First of all, at least one of your loans must be ready to be repaid; that is, you need to have graduated, left school, or have the loan in default status. Also, in order to fill out the application, you will need to have all your loan information handy. This includes:

  • Loan records
  • Bills
  • Account statements

Step 1: Know Your Interest Rate

The interest rate on your consolidated loan will be the weighted average of the interest rate on the loans you are consolidating, rounded to the nearest higher 1/8 of one percent. This will be fixed for the life of the consolidated loan and cannot exceed 8.25%. To calculate your interest rate, go to the Department of Education's rate calculator.

Step 2: Complete an Application and Promissory Note

You will next need to fill out an application and sign a promissory note. You can do this on paper, over the telephone or online. For more information on where to get an application or to fill out an online application, see this page. When filling in the application, remember to include information on all your loans, even ones you do not want consolidated.

Step 3: Review Your Loan Statement

After your direct loan consolidation is approved, you will receive a letter and a loan statement from the Department of Education. This will contain information on each of your original loans and the consolidated loan. You will have ten days to review the information and make any changes.

Step 4: Repayment

You are now ready to begin making payments on your consolidated loan. You will still pay on a monthly basis, but your payments should be lower and you will have a longer time period over which to complete repayment, possibly as much as thirty years.


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