What Happens When You Consolidate?

Consolidation is the process of taking out a new loan from the Department of Education to replace your existing loan or loans. When you consolidate your loans, you will be left with one new loan called a “Direct Consolidation Loan.” If you have any loans other than Direct Loans, you will need to consolidate them into a Direct Consolidation Loan in order for your loans to qualify for PSLF. Through October 31, 2022, only, your new loan will be credited with as many qualifying payments towards PSLF as whichever previous loan had the most payments before you consolidated. Once you get to 120 qualifying payments, this new Direct Loan will be eligible for forgiveness.

Tip: For this reason, some borrowers may want to consolidate older and newer loans together, even if each loan is already a Direct Loan, because the new Direct Consolidation Loan will likely be entirely forgiven sooner than some of the individual loans.

**Reminder: Before you consolidate, check that your employer is PSLF eligible!

Learn more here!

How to consolidate your loans:

↓Watch this video or read below for step-by-step instructions about how to consolidate your loans.↓


1. Go to the federal government’s website: studentaid.gov

Navigate to the “Consolidate My Loans” option under the “Manage Loans” tab.

2. Navigate to the Direct Consolidation Loan Application

The online application will allow you to select the loans that you want to include in your consolidation.

TIP: Although you are not required to consolidate your existing Direct Loans, which already qualify for PSLF, the Department of Education has indicated that for borrowers who consolidate all of their loans, it will use the oldest of those loans, which will likely have the most qualifying payments toward PSLF forgiveness, to determine when to forgive the entire new consolidated loan. For this reason, we recommend borrowers consolidate all of their loans together.

The application will also ask you to select the loan servicer that you want for your newly consolidated loan. You can select any servicer, including your current servicer.

You will also be asked to select a repayment plan for your new consolidated loan. Selecting an income-driven repayment plan, such as Income-Based Repayment or Pay As You Earn, that is affordable is often the best option for most borrowers. Additionally, under the regular PSLF program requirements and the special waiver rules, borrowers on income-driven replacement plans will remain eligible for PSLF. It is important to make sure that your repayment plan is eligible for PSLF. Generally, the standard 10-year repayment plan and the income-driven repayment plans are eligible for PSLF.

3. Finalize your consolidation application.

After you have made it to the end of the consolidation application, you will be asked to review terms and sign for your new loan.

Once completed, it may take several weeks to receive confirmation of your new Direct Consolidation Loan. In the meantime, you can still continue the process to apply for PSLF.

Note: In most cases, you will be able to directly input your income information from the IRS website. However, sometimes you will not be able to have your consolidation application processed online and you will have to submit paper documentation of your income, through tax returns or pay stubs, via mail to your new servicer. The FSA website will direct you on how to document your income.