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Frequently Asked Questions
  1. What are the benefits of a Direct Consolidation Loan?
  2. Who is eligible for a Direct Consolidation Loan?
  3. Can I obtain a Direct Consolidation Loan if I don't have any Direct Loans?
  4. Can I consolidate a PLUS Loan?
  5. Can I consolidate Perkins Loans?
  6. Can I consolidate health professions loans?
  7. Can I consolidate my loans if I am in school?
  8. Can I consolidate an existing consolidation loan?
  9. Can I consolidate my loans that are in grace?
  10. What special conditions apply if I am in already in repayment?
  11. Can I consolidate jointly with my spouse?
  12. Can I consolidate a defaulted loan?
  13. Can I delay processing of my consolidation application?
  14. Should I rehabilitate before consolidating my defaulted loan?
  15. What are the consequences of defaulting?
  16. What are the repayment plans?
  17. How is the amount of my payment calculated under the Income Contingent Repayment Plan?
  18. How is the amount of my payment calculated under the Income-Based Repayment Plan?
  19. What is Alternative Documentation of Income?
  20. Can I change repayment plans?
  21. How long does it take to consolidate my loans once I submit my application?
  22. When can I expect my first monthly payment to be due?
  23. How do I make payments?
  24. Can I prepay on my loan?
  25. How does Total Education Indebtedness effect the repayment term of my Direct Consolidation Loan?

1. What are the benefits of a Direct Consolidation Loan?

Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

One Lender and One Monthly Payment
With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.

Flexible Repayment Options
Borrowers can choose from multiple plans to repay their Direct Consolidation Loan, including plans that base the required monthly payment amount on the borrower's income. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at anytime.

No Minimum or Maximum Loan Amounts or Fees
There is no minimum amount required to qualify for a Direct Consolidation Loan! In addition, consolidation is free.

Reduced Monthly Payments
A Direct Consolidation Loan may ease the strain on a borrower's budget by lowering the borrower's overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower's Federal education loans.

Retention of Subsidy Benefits
There are two (2) possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on most types of subsidized loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.

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2. Who is eligible for a Direct Consolidation Loan?

To qualify for Direct Consolidation Loans, borrowers must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace or repayment status. Repayment status includes loans that are in a deferment or forbearance period. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan.

Borrowers can consolidate most defaulted federal education loans, if they make satisfactory repayment arrangements with their current loan holder(s) or agree to repay their new Direct Consolidation Loan under the Income Contingent Repayment Plan or Income Based Repayment Plan.

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3. Can I obtain a Direct Consolidation Loan if I don't have any Direct Loans?

Yes, borrowers without any Direct Loans may be eligible for a Direct Consolidation Loan if they consolidate at least one FFEL Loan.

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4. Can I consolidate a PLUS Loan?

Yes, PLUS Loans can be consolidated into a Direct Consolidation Loan. However, if you consolidate a parent PLUS loan, your new Direct Consolidation Loan cannot be repaid under the IBR Plan.

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5. Can I consolidate a Perkins Loan?

Yes, it is possible to consolidate Perkins Loans into a Direct Consolidation Loan if borrowers include at least one Direct Loan or Federal Family Education Loan (FFEL) in their request. Perkins Loans cannot be included in a Direct Consolidation Loan by themselves. Furthermore, all Perkins Loans consolidated into the Direct Loan Program will be included in the unsubsidized portion of the Direct Consolidation Loan.

Borrowers should carefully weigh the advantages and disadvantages of including a Perkins Loan in a consolidation loan. While the borrowers gain the benefits of the Direct Consolidation Loan Program, they also lose the benefits associated with the Perkins Loan Program.

We recommend that you consider the following points prior to making a decision:

  • Borrowers may qualify for cancellation of some or all of their Perkins Loans in exchange performing certain kinds of public service. These cancellation benefits are lost when a Perkins Loan is included in a Direct Consolidation Loan.
  • Perkins Loans have a grace period of 6-9 months. When a Perkins loan is consolidated, any remaining grace period is lost.
  • Interest does not accrue when a Perkins Loan is placed in deferment. However, a Perkins Loan is included in the unsubsidized portion of a Direct Consolidation Loan, and borrowers are responsible for interest that accrues on the unsubsidized portion of a Direct Consolidation Loan during deferment periods.
  • Perkins Loans generally have a lower interest rate but have a less flexible repayment period of 10 years.

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6. Can I consolidate health professions loans?

Yes, With a Direct Consolidation Loan, borrowers can include certain health profession loans sponsored through the U.S. Department of Health and Human Services with other Federal education loans in their Direct Consolidation Loan. Borrowers must include at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan in the Direct Consolidation Loan.

Eligible Health Professions Loans

  • Health Professions Student Loans (HPSL)
  • Health Education Assistance Loans (HEAL)
  • Loans for Disadvantaged Students (LDS)
  • Nursing Student Loans (NSL)

The Advantages

Direct Consolidation Loans offer many advantages to borrowers of health professions loans. These include:

  • a longer repayment period, which may result in a lower monthly payment; AND a single monthly payment

When deciding to consolidate a health professions loans, consider the following advantages:

  • Borrowers who have defaulted on a HEAL may include the collection costs and late fees in a Direct Consolidation Loan. These fees may not be included in HEAL Refinancing.
  • To qualify for an in-school deferment, Direct Consolidation Loan borrowers must be attending school at least half-time. HPSL, HEAL, and LDS borrowers are required to attend school full time to be eligible for an in-school deferment.

Issues to Consider

Before applying for a Direct Consolidation Loan, consider the following points:

  • HEAL loans have fixed or variable rates that are tied to the average 91-day Treasury bill rate plus 3 percentage points. There is no maximum interest rate for variable rate HEAL loans. In contrast, the interest rate for a Direct Consolidation Loan is based on the weighted average of the interest rates on loans being consolidated, rounded to the nearest higher one-eighth of one percent. It is a fixed rate. The interest rate for Direct Consolidation Loans that were made based on applications received prior to July 1, 2013 will not exceed 8.25 percent. For Direct Consolidation Loans that are made based on applications received on or after July 1, 2013, there is no cap on the interest rate.
  • The interest on some health professions loans is subsidized by the U.S. Department of Health and Human Services. This interest subsidy is lost when these loans are included in a Direct Consolidation Loan.
  • Interest does not accrue during deferment for HPSL, LDS, and NSL borrowers. Interest does accrue during deferment on the portion of Direct Consolidation Loans that repaid health professions loans.
  • Borrowers who consolidate Health Professions Loans do not retain the deferment benefits that apply to those loans. However, they gain the deferment benefits that apply to Direct Consolidation Loans.

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7. Can I consolidate my loans if I am enrolled in school?

Borrowers who are enrolled in school cannot consolidate loans that are in an in-school status. These are loans that have not yet entered or used up the 6-month grace period entitlement. However, borrowers may consolidate loans that are in an in-school deferment status.

Borrowers still can consolidate loans that are in grace or repayment (including loans that are in a deferment or forbearance period).

Example: A borrower who has education loans stopped attending school for a year and the loans used up the 6-month grace period and entered repayment. The borrower returned to school and obtained new loans, and received an in-school deferment on the earlier loans that had previously entered repayment. While enrolled, the borrower applies for a Direct Consolidation Loan. The Direct Consolidation Loan can include the first group of loans the borrower received that are in an in-school deferment status, but not the newly received loans that are in an in-school status. Once the borrower leaves school again he or she can submit a new Direct Loan Consolidation application to combine the original consolidation loan and the other remaining loans, or in some cases may be able to add the new loans to the existing consolidation loan.

Borrowers can add loans to an existing consolidation for up to 180 days after the Direct Consolidation Loan was first disbursed. If more than 180 days has passed, borrowers can apply for a new Direct Consolidation Loan. The new consolidation loan can include the original Direct Consolidation loan and must include another eligible outstanding Federal education loan.

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8. Can I consolidate an existing consolidation loan?

Yes, in some cases:

  • Borrowers can consolidate an existing Direct Consolidation Loan or Federal Consolidation Loan into a new Direct Consolidation Loan if they include at least one other FFEL or Direct Loan in the consolidation.
  • Borrowers can consolidate a single Federal Consolidation Loan (without including any additional loans) if the loan is in default status or has been submitted to a guaranty agency for default aversion by the loan holder. In this case, the new Direct Consolidation Loan must be repaid under the ICR or IBR plan.
  • Borrowers can consolidate a single Federal Consolidation Loan (without including any additional loans) if they want to use the Public Service Loan Forgiveness Program or the no accrual of interest benefit for active duty service members.

NOTE: Your Federal Loan Servicer has information on the Public Service Loan Forgiveness Program and the no accrual of interest benefit for active duty service members.

Although borrowers may consolidate a single Federal Consolidation Loan without including any additional loans under certain circumstances (as explained above), an existing Direct Consolidation Loan may be consolidated only if at least one additional eligible loan is included in the consolidation.

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9. Can I consolidate my loans that are in grace?

Yes. However, once grace status loans are consolidated borrowers lose any remaining grace period, unless they request delayed processing of their consolidation loan application (see FAQ #13). Borrowers receive their first bills within 60 days after the new Direct Consolidation Loan is made.

In some cases, borrowers who consolidate loans that are in the grace period may receive a lower interest rate on the new Direct Consolidation Loan:

  • Some loans first disbursed before July 1, 2006 have variable interest rates that are lower during the grace period. If a borrower consolidates one of these variable rate loans during the grace period, this may result in a lower interest rate on the new Direct Consolidation Loan.
  • Loans first disbursed on or after July 1, 2006 have fixed interest rates that are the same during all periods, including the grace period. While borrowers with fixed interest rate loans can consolidate while in grace, there is no potential interest rate benefit in doing so.

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10. What special conditions apply if I am in repayment and just consolidating now?

Borrowers in repayment who want to consolidate their Federal education loans should continue making payments until their loan holder notifies them that their loans are paid in full.

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11. Can I consolidate jointly with my spouse?

No, a married couple may not consolidate their individual Federal education loans into a single Direct Consolidation Loan as joint borrowers.

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12. Can I Consolidate a Defaulted Loan?

Generally, Federal education loan(s) in default may be consolidated in a Direct Consolidation Loan if borrowers:

If, before applying for consolidation, borrowers want to completely clear the default notation from their credit records, they may want to consider another option: loan rehabilitation. Borrowers should contact their loan holders to obtain more information about this option.

Borrowers cannot consolidate defaulted loans under these conditions:

  • If a judgment has been issued against a defaulted loan, it cannot be included in the consolidation unless the judgment order has been vacated (dismissed).
  • If they are trying to consolidate defaulted Direct Consolidation Loans and do not include at least one additional eligible loan in the consolidation.

Note: Borrowers with defaulted FFEL or Direct Loan Program loans may be liable for collection costs incurred to collect the loans. If the holder of the defaulted loan, which may be either the U.S. Department of Education or a guaranty agency, retains a collection agency to collect defaulted loans, charges imposed by the collection agency may be added to the amount borrowers owe. This means that the amount of the Direct Consolidation Loan may include collection costs of up to 18.5% of the principal and interest outstanding on the defaulted loan.

For defaulted Perkins Loans and health professions loans, collection costs may equal as much as the amount owed at the time the defaulted loan is paid off through consolidation.

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13. Can I delay processing of my consolidation application?

Yes, you can delay the processing of your Direct Consolidation Loan until closer to the end of your grace period end date if any of the loans you want to consolidate are in a grace period.

Normally, when you consolidate your existing loan(s) into a new Direct Consolidation Loan, you will be required to start repayment of your new loan immediately. However, if any loan you want to consolidate is still in a grace period, you can delay entering repayment on your new Direct Consolidation Loan until closer to your grace period end date by entering your expected grace period end date (month and year) in the space provided on the application. We will start processing your application about 45 days before the expected grace period end date that you provide. If you leave the expected grace period end date blank on your consolidation application, your Direct Consolidation Loan will enter repayment immediately and you will lose the remaining portion of the grace period on the loans you are consolidating.

You can select a date up to nine (9) months into the future. If your grace end date is more than 9 months away, wait to submit your application.

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14. Should I rehabilitate before consolidating my defaulted loan?

Rehabilitation or Consolidation?

There are many benefits to rehabilitating a defaulted loan before consolidation. If you consolidate a defaulted loan without rehabilitating it , your credit record continues to show a default status on the loan. This is true even after the consolidation loan pays off the defaulted loan in full.

  • Consolidating a defaulted loan will result in your credit report bearing the notation that the loan was in default but then "paid in full." This notation will remain on the credit report for up to seven years. While a "paid in full" notation is preferable to an unpaid default, there is still the possibility that lenders will deny you future credit, such as mortgages, auto loans, or credit cards because of this notation.

However, if you rehabilitate a defaulted loan before consolidating it , the loan holder will update your credit record to no longer reflect the default status of the rehabilitated loan(s).

  • Rehabilitating a defaulted Direct Loan or FFEL loan requires that you make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) consecutive month period. Rehabilitating a defaulted Perkins loan requires nine (9) on-time monthly payments. Contact your loan holder to obtain additional rehabilitation terms and conditions for your loan type.

Keep in mind that if you default on your loan, you are liable for any collection costs incurred to collect the loan. If you pay off the defaulted loan by taking out a Consolidation Loan, the amount you borrow must be enough to pay off your defaulted loan, including principal, interest, and collection costs. This means that the amount of the new loan may need to be up to 18.5% larger than the principal and interest outstanding on your defaulted loan.

Both rehabilitation and consolidation will reinstate your eligibility for additional Federal student aid under Title IV of the Higher Education Act (Pell Grants, Direct Loans, etc.)

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15. What are the consequences of defaulting?

Borrowers who fail to make a payment on time are considered delinquent on their Direct Consolidation Loans. Borrowers who do not make payments for 270 days are in default. Defaulting has severe and long-lasting consequences, as follows:

  • The Department of Education can immediately demand repayment of the total loan amount due.
  • The Department of Education will attempt to collect the debt and may charge collection costs.
  • The Department of Education reports defaulted loans to national credit bureaus, damaging borrowers’ credit ratings and, making it difficult for borrowers to make purchases such as cars or homes.
  • Borrowers with loans in default are ineligible for Title IV student aid.
  • Borrowers with loans in default are ineligible for deferments
  • The Internal Revenue Service can withhold borrowers’ Federal income tax refunds.
  • Borrowers' wages may be garnished.

It is important that borrowers with Direct Consolidation Loans stay in touch with your Federal Loan Servicer. Default can occur when borrowers fail to keep their Federal Loan Servicer up to date on address and name changes, causing billing statements to go astray. In addition, your Federal Loan Servicer can offer alternatives when borrowers have trouble making monthly payments. Borrowers may apply for a deferment or forbearance, or change repayment plans.

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16. What are the repayment plans?

When repaying a Direct Consolidation Loan, you may choose from multiple repayment plans with various terms.


You will pay a fixed amount each month until your loan(s) are paid in full. Your monthly payments will be at least $50 for up to 10 to 30 years, based on your total education indebtedness.

Your minimum payment amount will be at least equal to the amount of interest accrued monthly. Your payments start out low, and then increase every two years for up to 10 to 30 years, based on your total education indebtedness

To be eligible, you must have had no outstanding balance on a Direct Loan on October 7, 1998 or on the date you obtained a Direct Loan after that date, and your current outstanding Direct Loan balance must be greater than $30,000. Under this plan you will have up to 25 years to repay your loan(s). You have two payment options:
  • Fixed Monthly Payment Option - You will pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50.
  • Graduated Monthly Payment Option - Your minimum payment amount will be at least $50 or the amount of interest accrued monthly, whichever is greater. Your payments start out low, and then increase every two years.

Your monthly payments will be based on annual income, Direct Loan balance and family size, and are spread over a term of up to 25 years.

Your monthly payments will be based on annual income and family size, and spread over a term of up to 25 years. You must be experiencing a partial financial hardship to initially select the IBR plan and to continue making income-based payments under this plan.

If you consolidate more than one loan type (subsidized, unsubsidized and PLUS) you will have one Direct Consolidation Loan with up to two parts: Direct Subsidized and Direct Unsubsidized (which includes PLUS) Consolidation Loans. Even with up to two parts of each Direct Consolidation Loan, you make only one payment each month.

If you have not chosen a repayment plan, are not required to pay using ICR or IBR, and we determine that you currently have other Direct Loans, we may assign your new Direct Consolidation Loan(s) to the same repayment plan as your active loan(s). If you do not currently have
Direct Loan(s), we may assign your new Direct Consolidation Loan(s) to the Consolidation Standard Repayment Plan. You can change at a later date to other plans for which you may be eligible.

If at any time you are unable to make the payments, you may request a deferment to temporarily suspend your monthly loan payments or a temporary forbearance to postpone payments.

Standard Repayment Plan

Under this plan, you will pay a fixed amount of at least $50 each month for up to 10 to 30 years, based on your total education indebtedness. This plan may result in lower total interest paid when compared to repayment under one of the graduated plans.(See Example A and the Standard and Graduated Repayment Plan Repayment Periods Table)

Example A

This example shows a Direct Consolidation Loan repaid at an 8.25 percent interest rate under the Standard Repayment Plan for 15 years (180 payments).

Loan Amount Monthly Payment Total Amount Repaid
$15,000 $145.52 $26,193.60*

*$15,000 in principal and $11,193.60 in interest

Graduated Repayment Plan

Under this plan, you will pay a minimum payment amount at least equal to the amount of interest accrued monthly for up to 10 to 30 years, based on your total education indebtedness. Your payments start out low, and then increase every two years. Generally, the amount you will repay over the term of your loan will be higher under the Graduated Repayment Plan than under the Standard Repayment Plan. This plan may be beneficial if your income is low now but is likely to steadily increase. (See Example B and the Standard and Graduated Repayment Plan Repayment Periods Table)

Example B

This example shows a Direct Consolidation Loan repaid at an 8.25 percent interest rate under the Graduated Repayment Plan for 15 years (180 payments).

Loan Amount Beginning Monthly Payment Ending Monthly Payment Total Amount Repaid
$15,000 $103.23 $244.01 $28,751.67*

*$15,000 in principal and $13,751.67 in interest

Extended Repayment Plan

To qualify for this plan, you must have had no outstanding balance on a Direct Loan on October 7, 1998 or on the date you obtained a Direct Loan after that date, and your current outstanding Direct Loan balance (your new Direct Consolidation Loan Amount plus other Direct Loans) must be greater than $30,000. Your plan options are:

  • Fixed Monthly Payment Option Under this plan, you will pay a fixed amount of at least $50 each month for up to 25 years. Repayment under this plan will result in lower total interest paid when compared to graduated plans with similar terms. (See Example C and the Extended Repayment Plan Repayment Periods Table)
  • Graduated Monthly Payment Option Under this plan, you will pay a minimum payment amount of at least $50 or the amount of interest accrued monthly, whichever is greater, for up to 25 years. Your payments start out low and then increase every two years. Repayment under this plan may provide lower initial monthly payments, although the total interest paid may be greater when compared to plans with similar terms with fixed payments. This plan may be beneficial if your income is low now but is likely to steadily increase. (See Example D and the Extended Repayment Plan Repayment Periods Table)

Example C

This example shows a Direct Consolidation Loan repaid at an 8.25 percent interest rate under the Extended Repayment Plan - Fixed Monthly Payment Option for 25 years (300 payments).

Loan Amount Monthly Payment Total Amount Repaid
$45,000 $354.81 $106,435.72*

*$45,000 in principal and $61,435.72 in interest

Example D

This example shows a Direct Consolidation Loan repaid at an 8.25 percent interest rate under the Extended Repayment Plan - Graduated Monthly Payment Option for 25 years (300 payments).

Loan Amount Beginning Monthly Payment Ending Monthly Payment Total Amount Repaid
$45,000 $309.65 $468.33 $114,150.59*

*$45,000 in principal and $61,150.59 in interest

Income Contingent Repayment (ICR) Plan

The ICR Plan gives you the flexibility to meet your obligations without causing you financial hardship. Monthly payments are based on your Adjusted Gross Income (AGI), loan balance and family size. (See Example E)

Example E

This example shows a borrower with a family size of one and a $39,201 AGI repaying a $15,000 Direct Consolidation Loan at an 8.25 percent interest rate under the ICR Plan.

Loan Amount Adjusted Gross Income Beginning Monthly Payment Number of Years in Repayment Total Amount Repaid
$15,000 $39,201 $146 14 $25,034*

*$15,000 in principal and $10,034 in interest

Monthly payments are adjusted annually to reflect inflation, and any changes in family size and income. You will be required to provided updated income information annually and must notify your Federal Loan Servicer if your family size changes.

NOTE: If your (and your spouse's, if applicable) AGI is not available or if the AGI from your most recently filed tax return does not reasonably reflect your (and your spouse's, if applicable) current income, you may submit alternative documentation of income that will be used to calculate your monthly payment amount.

Monthly payment amounts for some borrowers may not be enough to cover the interest accruing on their loans. This situation is referred to as negative amortization. In such cases, the unpaid interest is capitalized and added to the principal balance once per year. The amount added to the principal balance will never exceed 10 percent of the original Direct Consolidation Loan amount. Once this capitalization limit has been reached, interest continues to accrue but is not capitalized. The capitalization limit does not apply to interest that accrues during deferment or forbearance.

Under this plan, it is possible you will not make payments large enough to pay off your loans in 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income.

NOTE: The ICR Plan is not available for parent Direct PLUS Loans or for Direct PLUS Consolidation Loans (made before July 1, 2006). However, Direct Consolidation Loans made on or after July 1, 2006 that repaid parent PLUS loans may be repaid under the ICR Plan.

Income-Based Repayment (IBR) Plan

The IBR Plan gives you the flexibility to meet your obligations without causing you financial hardship. Monthly payments are based on your Adjusted Gross Income (AGI), and family size, and you must be experiencing a partial financial hardship to initially select this plan. (See Example F)

Example F

This example shows a borrower with a family size of two and a $25,000 AGI repaying a $25,000 Direct Consolidation Loan at an 8.25 percent interest rate under the IBR Plan.

Loan Amount Adjusted Gross Income Beginning Monthly Payment Number of Years in Repayment Total Amount Repaid
$25,000 $25,000 $39 25 $52,725*

*$25,000 in principal and $27,725 in interest

Monthly payments are adjusted annually to reflect changes in income or family size, or changes to your partial financial hardship status. You will be required to provide updated income information and certify your family size annually.

NOTE: If your (and your spouse's, if applicable) AGI is not available or if the AGI from your most recently filed tax return does not reasonably reflect your (and your spouse's, if applicable) current income, you may submit alternative documentation of income that will be used to calculate your monthly payment amount.

Monthly payment amounts for some borrowers may not be enough to cover the interest accruing on their loans. This situation is referred to as negative amortization. If your payment does not cover all of the interest accumulating monthly on your Direct Subsidized Loans or Direct Subsidized Consolidation Loans, you will not be charged the remaining portion of the interest on those loans for a period not to exceed three consecutive years from the time you begin repayment under the IBR Plan. While on this plan, unpaid interest is capitalized only if you are determined to no longer have a partial financial hardship or if you choose to leave the IBR plan.

Under this plan, it is possible you will not make payments large enough to pay off your loans in 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income.

NOTE: The IBR Plan is not available for parent Direct PLUS Loans, Direct PLUS Consolidation Loans, (made before July 1, 2006), or Direct Consolidation Loans that repaid parent Direct PLUS Loans or parent Federal Family Education Loan Program PLUS Loans. If you consolidate a parent PLUS loan, your new Direct Consolidation Loan cannot be repaid under the IBR Plan.

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17. How is the amount of my payment calculated under the ICR Plan?

The ICR Plan is designed to keep payments affordable. Generally, you pay the lesser of:

  • the amount you would pay if you repaid your loan in 12 years, multiplied by an income percentage factor that varies with annual income, or
  • 20 percent of your discretionary income (AGI minus the poverty level for your family size)

Under the ICR Plan, the monthly payment is $0 for borrowers with family incomes that are less than or equal to the U.S. Department of Health and Human Services poverty level for their family size. Borrowers whose calculated monthly payment is greater than $0 but less than $5 are required to make a $5 monthly payment. Other borrowers must pay the calculated monthly payment.

Until the Federal Loan Servicers receive the income information needed to determine the monthly payment amount, borrowers' monthly payments are equal to the interest that accrues each month. If they are unable to make the interest-only payments, borrowers may request a forbearance until the first scheduled Income Contingent Repayment (ICR) Plan payment is due.

If you are married and file your federal income taxes jointly with your spouse, both your AGI and your spouse's AGI will be used to calculate your monthly payment. If you and your spouse file taxes separately, only your AGI will be used to calculate your monthly payment.

The monthly payment in Example E is calculated as follows:

Step 1:

Multiply the principal balance by the constant multiplier for 8.25 percent interest (0.0109621)
$15,000 x 0.0109621 = $164.4315

Step 2:

Multiply the result by the income percentage factor that corresponds to the borrower's income.
88.77 (0.8877) x 164.4315 = $146

Step 3:

Determine 20 percent of discretionary income (based on the poverty guidelines for a family of one).
($39,201 - $10,890) x 0.20 / 12 = $471.85

Step 4:

Payment is the amount determined in step 2 because it is less than 20 percent of discretionary income.

NOTE: This example is based on the 2011 income percentage factors and U.S. Department of Health and Human Services (HHS) poverty level guidelines.

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18. How is the amount of my payment calculated under the IBR Plan?

Under this plan, your required monthly payment during periods when you have a partial financial hardship will be no more than 15 percent of the amount by which your AGI exceeds 150 percent of the poverty line income for your family size and state, divided by 12. In addition:

  • If the calculated payment is less than $5.00 your required monthly payment will be $0.00.
  • If the calculated payment is equal to or greater than $5.00, but less than $10.00, your required monthly payment will be $10.00.
    Unless you are married and file a joint federal tax return with your spouse, and your spouse has loans that are eligible for repayment under IBR (see below), if all of your eligible loans are not Direct Loans, your monthly payment amount will be adjusted by multiplying the calculated monthly IBR payment (as described above) by the percentage of the total amount of your eligible loans that are Direct Loans.
  • If you are married and file a joint federal tax return, and if your spouse also has loans that are eligible for repayment under IBR, your monthly payment amount will be determined as follows:
    1. Your percentage and your spouse's percentage of the total combined eligible loan debt of you and your spouse will be determined;
    2. Your calculated monthly IBR payment (as described above) will be adjusted by multiplying the calculated payment amount by the percentage determined in #1.
    3. If all of your eligible loans are not Direct Loans, your adjusted monthly payment amount as determined in #2 will be further adjusted by multiplying that amount by the percentage of the total amount of your eligible loans that are Direct Loans.

    If you are married and file your federal income taxes jointly with your spouse, both your AGI and your spouse's AGI will be used to calculate your monthly payment. If you and your spouse file taxes separately, only your AGI will be used to calculate your monthly payment.

    Your repayment amount may be adjusted annually. It may be higher or lower depending on changes in your income.

    NOTE: Refer to the Glossary for a definition of "eligible loans".
    If you no longer have partial financial hardship, your monthly payment amount will be adjusted and will no longer be based on your income. Your adjusted payment amount will not exceed the amount required to pay your loan in full under a 10-year Standard Repayment Plan based on the amount of your eligible loans that was outstanding at the time you began repayment under the IBR Plan (minimum of $50.00). The repayment period based on this recalculated payment amount may be more than 10 years.

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    19. What is Alternative Documentation of Income?

    Your monthly payment under the ICR and IBR plans is generally based on your most recent Adjusted Gross Income (AGI) as shown on your Federal income tax return and other factors. However, if your AGI is unavailable or does not accurately reflect your current income; your monthly payment amount may be determined based on alternative documentation of income that you provide, such as pay stubs or cancelled checks.

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    20. Can I change repayment plans?

    Yes. Most borrowers may change repayment plans at any time. However, borrowers who are required to repay under the ICR and IBR plan must make three consecutive monthly payments before changing to another plan. There is no limit to the number of times borrowers may change plans.

    • A borrower may change to the ICR plan at any time. After the change, the borrower's repayment period will be a maximum of 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income. (The ICR Plan is NOT available for repayment of Direct PLUS Consolidation Loans made before July 1, 2006 or parent Direct PLUS Loans. However, you are eligible to repay any Direct Consolidation Loans made on/after July 1, 2006 under the ICR Plan even if it includes a parent PLUS Loan.)

    • A borrower may change to the IBR plan at any time. After the change, the borrower's repayment period will be a maximum of 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income. If you choose to leave the IBR Plan, your account will be placed on the Standard repayment plan. You may then change to another plan after making one payment under the Standard repayment plan.

    • A borrower may change to another plan as long as the new plan has a repayment term that is longer than the amount of time the borrower has already spent in repayment. The new repayment term is determined by subtracting the amount of time a borrower has spent in repayment from the term allowed under the new plan.

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    21. How long does it take to consolidate my loans once I submit my application?

    The consolidation process generally takes 60-90 days. Using our online Web application can reduce the amount of time it takes to consolidate a borrower's loan.

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    22. When can I expect my first monthly payment to be due?

    Borrowers will receive an initial billing statement from their Federal Loan Servicer within 60 days of the first disbursement of their Direct Consolidation Loan. Payments are due monthly.

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    23. How do I make payments?

    Borrowers will be sent monthly billing statements from their Federal Loan Servicer, unless they enroll in Automatic Debiting.

    Borrowers receive a 0.25 percent discount on their interest rate for as long as they continue to make payments with Automatic Debiting.

    Borrowers must keep their Federal Loan Servicer informed of changes of address and to their names. Borrowers are responsible for making payments on time regardless of whether they receive billing statements. Borrowers should send payments to:

    U.S. Department of Education
    Direct Loan Payment Center
    P.O. Box 530260
    Atlanta, GA 30353-0260

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    24. Can I prepay on my loan?

    Borrowers may prepay all or part of the unpaid balance on any Direct Loan at any time, without an early repayment penalty. If a borrower makes a payment that exceeds the required monthly payment, the prepayment will be applied first to any charges or collection costs, then to outstanding interest, and last to principal. However, if a borrower's account has no outstanding interest, the prepayment is applied entirely to principal. If the prepayment is twice the borrower's monthly payment, the next payment due date is advanced unless the borrower specifies otherwise. The borrower will be notified of a revised due date.

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    25. How does Total Education Indebtedness effect the repayment term of my Direct Consolidation Loan?

    If you elect to repay your Direct Consolidation Loan under either the Standard or Graduated Repayment Plans, your repayment term is determined based on your consolidation loan amount and the amount of other eligible education loans that are not part of your Direct Consolidation Loan as long as you provided information about those loans on your application. For this purpose, the amount of your other eligible loans that you are not consolidating may not exceed the amount of you Direct Consolidation Loan. Here are examples of how Total Education Indebtedness effects the repayment term for your Direct Consolidation Loan.

    Your Existing Loans:
    Loan A $ 2,500
    Loan B $ 6,000
    Loan C $ 2,500
    Loan D $ 7,500
    Loan E $ 7,500
    Loan F $13,000
    Total Outstanding Amount $39,000

    Examples 1 and 2 assume that you reported all your outstanding education loans on your consolidation application.

      You Consolidate Your Direct Consolidation Loan Amount Your Other Eligible Education Loans Your Total Education Indebtedness Your Direct Consolidation Loan Repayment Term (approx.)
    Example 1
      Loans A and B $8,500 $30,500 $17,000 15 Years
    Example 2
      Loans A, B, C, D, and E $26,000 $13,000 $39,000 20 Years

    In Example 1 you consolidated two of your six eligible outstanding loans. As a result, we base your repayment term on your Direct Consolidation Loan amount plus other eligible indebtedness, but only up to the amount of your new Direct Consolidation Loan:

    Direct Consolidation Loan ($8,500) + Other Eligible Education Loan Allowance ($8,500)
    = Total Indebtedness ($17,000)

    In Example 2 you consolidated five of your six eligible outstanding loans so the calculation of Total Education Indebtedness includes the full amount of your remaining other eligible education loan because that amount is less than the amount of your Direct Consolidation Loan. The result is a longer repayment term than in Example 1.

    Direct Consolidation Loan ($26,000) + Other Eligible Education Loan Allowance
    ($13,000) = Total Education Indebtedness ($39,000)

    Finally, Example 3 illustrates the impact on your repayment term if you did not report all of your outstanding education loans on your Direct Consolidation Loan application. Your repayment plan term is shorter than in Example 1.

      You Consolidate Your Direct Consolidation Loan Amount Your Other Eligible Education Loans Your Total Education Indebtedness Your Direct Consolidation Loan Repayment Term (approx.)
    Example 3
      Loans A and B $8,500 $0 $8,500 11 Years

    Remember that the longer your repayment term the lower your monthly payment will be. However, this usually means that the total interest paid during repayment will be higher. Only you can decide what plan is best for you. And, you can change plans later if your plan no longer suits your needs. Use our convenient online calculator to estimate your number of monthly payments, monthly payment amounts and total interest to be paid for as many different scenarios as you like.

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SITE REQUIREMENTS PRIVACY NOTICES GLOSSARY ABOUT CONSOLIDATION