Consolidation combines multiple federal student loans into a single loan with one monthly payment; this payment can be significantly lower than the payment required otherwise. A Consolidation Loan pays off the existing federal student loans; the borrower then repays the Consolidation Loan. Most federal student loans are eligible for consolidation, including subsidized and unsubsidized Federal Direct and Federal Stafford Loans, Federal Graduate PLUS loans, and Health Professions Student Loans. Parents can also consolidate their Federal Parent PLUS loans.
Consolidation Loans are available through the FFEL (Federal Family Education Loan) program and the Federal Direct Loan Program. Both allow the borrower to combine different types and amounts of federal student loans to simplify repayment.