A Guide to Direct Consolidation Loans

After graduating from college, you may leave school with more than one student loan. If juggling more than one loan feels overwhelming, a Direct Consolidation Loan might be a good option for you.

In this article, we’ll talk about what a Direct Consolidation Loan is, the pros and cons, and how to get a Direct Consolidation Loan.

What is a Direct Consolidation Loan?

A Direct Consolidation Loan allows you to combine multiple federal student loans into a single loan with a fixed interest rate.

For private student loans, something similar exists but with a different name: student loan refinancing. Refinancing allows you to convert private and/or federal student loans into one private loan. See this list of the best student loan refinance rates.

Pros and Cons of Getting a Direct Consolidation Loan

It’s important to weigh the pros and cons of a Direct Consolidation Loan before deciding to move forward. Sure, having to make a single monthly payment rather than making multiple payments a month toward your student loans sounds neat. However, there are more things to consider.

How Long Does it Take to Get a Direct Consolidation Loan? 

Getting a Direct Consolidation Loan will take time. It typically takes 30-45 days to consolidate your loan, but it can take up to a few months.

However, filling out the Direct Consolidation Loan Application doesn’t take too long. If you are interested in applying for a Direct Consolidation Loan, the process must be completed in one sitting. In general, it takes around 30 minutes or less to complete.

Can Direct Consolidation Loans be Forgiven?

Did you know that consolidating your loans can make you eligible for the Public Service Loan Forgiveness program (PSLF)? The PSLF program is a federal loan forgiveness program for those employed in an eligible public service or nonprofit role. After ten years of making payments on your Direct Consolidation Loans, the Department of Education will forgive your remaining balance.

Keep in mind that due to the COVID-19 pandemic, past payments that aren’t typically eligible for loan forgiveness under this program can now be forgiven through the PSLF waiver. This means that if you have not consolidated your loans but you work for a qualifying employer and have been making payments, those payments can count toward the program if you consolidate your loans by Oct. 31, 2022.

Final Thoughts

Determining whether to consolidate your federal loans can be a tough decision to make. If you are passionate about public service or non-profit work, consolidating your loans might be the best option for you, but if you want to save as much money as possible in the long-term, it might make sense if you don’t do so. Weighing the pros and cons in relation to your situation can ease the concerns of whether or not consolidating your loans is a good option for you.

If you need help choosing the best student loan refinancing option for your private loans, Sparrow is a great place to start. Sparrow’s rate comparison tool allows you to easily compare rates side-by-side to find the best student loan refinance option for you. Get started today!