Restore Your Options and Access New Programs with Consolidation
Consolidation with the Direct Loan Program restores deferment and forbearance options, starts you out fresh with a new payment term, and gives you access to new programs for lower payments and forgiveness like the Pay As You Earn and Public Service Loan Forgiveness.


For borrowers who have previously defaulted on a federal student loan, consolidation can be the fresh start you want. However, there may be important steps you should take first depending on the present status of your loans – in default, rehabilitated, delinquent or current. This guide should help you create the best plan to get your loans and credit on track.


I am getting close to defaulting – what can I do?
  • Default on FFEL student loans happens when you are 270 days past due. If you are getting close to that point, the best thing to do is to contact your servicer(s) and see what options may be available to you. If NSLP is your guarantor, you may also receive letters and calls from our trained counselors offering assistance with options. Call us at 1-888-434-6548 to discuss options available to bring you current before you get too far past due to recover.


I have defaulted loans – now what are my options?
  • If this is your first time defaulting on your federal student loan, you should ask about a loan rehabilitation program to get your loans out of default. Completing the rehabilitation program will remove your loans from default and put them back into good standing.

  • Rehabilitation is a 9-10 month program of consecutive voluntary monthly payments. Garnished wages garnished and withheld tax refunds/government disbursements do not count as voluntary payments towards the program, so it is recommended to set up voluntary arrangements right away to avoid garnishment.

  • After the rehabilitation requirements are met, your loans will be assigned to a new servicer, the default will be removed from your credit, and you will start regular repayment again. Rehabilitated loans are again eligible for federal benefits such as postponement, income-driven repayment plans, and loan forgiveness programs.

  • If your loans are guaranteed and rehabilitated by NSLP, the loans will be transferred to Nelnet (otherwise check for your servicer).

  • If your defaulted loans are guaranteed by NSLP, communicate with your collection agency or call us at 402-479-6380 for assistance.


I have completed the rehabilitation program with NSLP – now what?
  • Once you have completed the rehabilitation period for you loan, your account will be brought back into good standing and transferred over to a new servicer.
  • If your loans are guaranteed and rehabilitated by NSLP, the loans will be transferred to Nelnet (otherwise check for your servicer).
  • At this point, your loan repayment picks up as it was before you defaulted on the loan, including payments.
  • Key things to remember:
    • Auto withdrawal for the rehabilitation program payments will stop. Set up payments with your new servicer (likely Nelnet).
    • Your loans will be transferred to a new servicer (likely Nelnet) and may not be the same company that was previously servicing your loans.
    • Payments will be set on the standard 10-year repayment plan (fixed payment amount). You may talk to your servicer if you need a lower payment.
    • Your new servicer will receive a record of months of deferment and forbearance you have already used. Your servicer may offer additional forbearance time on the loan.
  • You can only rehabilitate your loan once. If you default again after completing a rehabilitation program or you fail to enter rehabilitation program, your loans will go directly into collections and could lead to things such as:
    • Withholding of taxes
    • Litigation
    • Ineligibility for Title IV student aid (federal student loans and grants)
    • Suspension of Professional License
    • Administrative wage garnishment
    • Damaged credit score
    • Difficulty making major purchases based upon credit


I am out of options to use for my federal student loan – now what?
  • If you have run out of deferment and forbearance time, can’t afford payments, or are looking for a fresh start on your loans, you may want to consolidate. Anyone with a FFEL federal student loan can do a Direct Loan Consolidation with the Department of Education. The new Direct Consolidated Loan will be eligible for additional deferment/forbearance, new repayment plans, and forgiveness programs.

  • Your credit score will not be considered in a Direct Loan Consolidation request.

  • Even if you have previously consolidated, all loans guaranteed by NSLP are eligible for a new Direct Loan Consolidation with the Department of Education.

  • Applying is FREE on the Department of Education’s website or via paper application.


How can a consolidation help me? How does it work?
  • If you have multiple loans, consolidation will combine them into one new loan in the Direct Loan program. If you have a single loan, consolidation will refinance that loan into the Direct Loan program.

  • Why is being under the Direct Loan Program important? If you have a loan guaranteed by NSLP, it is a FFEL loan. The FFEL Program covers loans taken before 6/30/2010. However, new assistance and programs were created recently that are only available under the new Direct Loan Program, and not on FFEL loans.

  • Consolidating FFEL loans will place you under the Direct Loan program and open up new options for you:
    • Extended repayment plans allow for lower payments with a longer loan term.
    • More income driven repayment plans allow for payments based on family size and income, often lowering payments. These plans include forgiveness terms.
    • The Public Service Loan Forgiveness program forgives debt after 10 years of payments for those that meet the requirements.

  • After a consolidation, you may enjoy other benefits:
    • Consolidation renews any previously used deferment and forbearance time.
    • If you’ve had multiple loan servicers, managing your loan will be simplified with one servicer.
    • You will get to choose which company services your loan.
    • Access to rehabilitation in the case of default.

  • A Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%. There is no cap on the interest rate of a Direct Consolidation Loan. Estimate your interest rate by entering loan information here.

  • Processing for consolidation can take anywhere from 60 to 90 days after the application is submitted. During this time you will still be responsible for payments to your current loan servicer(s). You may want to contact your servicers or guarantee agency to explore options during the processing period.

  • Apply for a Direct Loan Consolidation at


Who can service my loan?
  • When you consolidate, you get to choose who will service your loan. Every servicer has the same programs available and must follow the Department of Educations regulations.

  • Exception: If you are going to be applying for the Public Service Loan Forgiveness Program (PSLF) your loans will be serviced by FedLoan Servicing (PHEAA) because they manage the PSLF program. If you did not select FedLoan the first time you submit an application for the PSLF your loans will be transferred to FedLoan Servicing once you start submitting certification of employment for PSLF.

    Servicer Name Servicer Address Servicer Phone Servicer Website
    Great Lakes Educational Loan Services, Inc. Consolidation Department
    P.O. Box 8956
    Madison, WI 53708-8956
    Nelnet P.O. Box 82658
    Lincoln, NE 68501-2658
    Navient (formerly Sallie Mae) Attn: ED Loan Consolidation
    P.O. Box 6180
    Indianapolis, IN 46206-6180
    FedLoan Servicing (PHEAA) FedLoan Consolidation Department
    P.O. Box 69186
    Harrisburg, PA 17106-9186


Frequently Asked Questions


Once I consolidate, will my interest rate go up?
  • Some may have the same effective interest rate and some will have a slightly higher rate due to rounding to the nearest 1/8 of a percent. You may estimate the weighted average of your loans here.

  • When you consolidate you are given a weighted average of your current interest rates rounded up to the nearest 1/8 of a percent. A weighted average is an average resulting from the multiplication of each component by a factor reflecting its importance.

  • An example of what weighted average is as follows:

  • Example 1:
    • If you have a $10,000 loan at 10% and a $1000 loan at 1%.
      • That can be broken down into 10 loans at $1000 at 10% and 1 loan at $1000 at 1%.
      • So, to find weighted average:
      • (10%+10%+10%+10%+10%+10%+10%+10%+10%+10%+1%)/11
      • = 9.18% weighted average with an $11,000 loan.

  • Example 2:
    • If you have a $1000 loan at 10% and a $10,000 loan at 1%.
      • That can be broken down into 1 loan at $1000 at 10% and 10 loans at $1000 at 1%.
      • So, to find weighted average:
      • (1%+1%+1%+1%+1%+1%+1%+1%+1%+1%+10%)/11
      • = 1.82% weighted average with an $11,000 loan.

  • Example 3:
    • If you have a $10,000 loan at 10% and a $1000 loan at 1%.
      • Then, (10,000*10% + 1000*1%)/11000) = 9.18%
      • That is the $10,000 loan multiplied by the interest rate (10%) of those loans.
      • Then add that to the $1000 loan multiplied by the interest rate (1%) of those loans.
      • Then divide that sum of those numbers by the total of the consolidated loan ($10,000+$1000 = $11,000)


Does it cost anything to consolidate my loans?
  • Consolidation is free to do! There are third party companies out there who may charge a fee to fill out the paperwork for you, but you can do it yourself for FREE on the Department of Education’s website in less than 20 minutes.


Will consolidating my loans affect my credit?
  • Doing a consolidation of your federal student loans should not affect your credit. If you experience credit reporting, it may be due to your existing loans falling past due. Talk to your current loan servicers to avoid delinquency, either by arranging payments or by requesting deferment/forbearance.


Can you consolidate a defaulted loan?
  • You can typically consolidate your loan while in default, though skipping the rehabilitation program will lock in the fees and the credit report will remain on your credit history for up to 7-10 years. You may not be able to consolidate now if your wages are being garnished or you are currently in a bankruptcy.

  • Defaulted borrowers should use to access the Direct Loan Program for defaulted loans.


Can I consolidate my spouse’s and my own loans together?
  • You are no longer allowed to combine your loans together into one. This program was previously offered but is not available now.


Can I reconsolidate my previous spousal consolidation into a direct loan?
  • You can do a reconsolidation in some situations; you will need to call the Department of Education’s consolidation department at (800) 557-7392 for more information.


If you have any other questions or would like assistance or about the consolidation process, please contact your servicer or guarantee agency to help you.



Direct Loan Program

Student Loan that is funded by the Department of Education and could have been taken out starting July 2008


FFEL Loan Program

Federal Student loan funded by a private bank (Wells Fargo, Wachovia, etc.) and backed by a guarantee agency (National Student Loan Program, Texas Guarantee Student Loan, etc.). Loan(s) would have been borrowed between 1965 to June 30, 2010.


Rehabilitation Program

A program of payment arrangements to bring a loan out of default. Once your loan is rehabilitated, the default status will be removed from your loan. You will regain eligibility for loan options, you will be eligible to receive additional federal student aid, and national consumer reporting agencies (credit bureaus) will be instructed to remove the record of the default from your credit history for the rehabilitated loan. You can rehabilitate a defaulted loan only once.