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Consolidating to direct loans

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You’re generally eligible once you graduate, leave school or drop below half-time enrollment.Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to consolidate them for you.

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You can choose one of four servicers for your new direct consolidation loan: Fed Loan Servicing, Great Lakes Educational Loan Services Inc., Navient and Nelnet.You can opt out, but you’ll have to submit a copy of your most recent federal tax return directly to your loan servicer after you finish the consolidation application.The remainder of the application involves filling in basic personal information and providing names of two references who have known you for at least three years.If your loans are already with one of those servicers, you can stay or choose a new one.On the standard repayment plan for direct consolidation loans, you’ll make equal monthly payments for 10 to 30 years, depending on your total federal student loan balance.You have to complete the application in a single session, so do your research before you start.

When you’re ready, go to studentloans.gov, log in, and follow these steps to apply: You can consolidate all your federal loans or just some of them.

When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.

So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.

You’ll save money if your new loan has a lower interest rate.

Your financial history — including your credit score, income, job history and educational background — will dictate your new interest rate when you refinance.

After you review, sign and submit your application, continue making payments on your existing federal loans until your application has been processed.