A Consolidation Loan is designed to help student and parent borrowers simplify loan repayment (and at times, reduce the interest rate) by combining several federal student loans with various repayment schedules into one consolidated loan. The borrower will have only one lender to deal with, one monthly payment, and may have an extended period in which to repay the loan. Most federal student loans and PLUS loans (both Direct and FFEL loans) are eligible for consolidation. Federal Direct Consolidation Loans are available from the U.S. Department of Education.

Direct Consolidation Loans may be obtained during the student's grace period, repayment period, or during periods of deferment or forbearance. While still in school, the borrower may apply for a Direct Consolidation Loan if the student is enrolled on at least a half-time basis, and has at least one federal student loan in an "in-school" period (the student has been continuously enrolled since the loan was disbursed.) Under certain circumstances, defaulted loans may also be consolidated; when this is the case, Title IV financial aid eligibility is reinstated.

There is no fee charged to process a Direct Consolidation Loan. The interest rate for Consolidation Loans is fixed for the entire period of repayment, at the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. The interest rate will never exceed 8.25%. The Standard, Extended or Graduated Repayment plans are available to a Direct Consolidation Loan borrower.

For application forms and additional information on Direct Consolidation Loans, contact the Consolidation Department of the U.S. Department of Education's Loan Origination Center. Call 800/557-7392 or access http://www.loanconsolidation.ed.gov