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With loan consolidation, the lender consolidates a borrower’s loans into a single loan by paying off the outstanding balances of selected loans. The interest rate of a consolidation loan is a fixed rate, and is the weighted average of all the loans being consolidated, rounded up to the nearest 1/8th of one percent or 8.25%, whichever is less.

Loan consolidation can be used as a way to manage debts. In some cases, consolidation can reduce monthly payments. It can also have some drawbacks. In addition to increasing the total consolidated debt, the borrower may lose eligibility for certain types of deferments if they consolidate.

Visit Mapping Your Future's Loan Consolidation page for more information about loan consolidation and to access a Loan Consolidator Worksheet that can be used to estimate monthly payments, principal and interest. A complete listing of loans eligible for consolidation is also provided.