A Federal Direct Consolidation Loan combines more than one individual federal student loan into a single new federal student loan with new terms and conditions. Many times borrowers select loan consolidation in order to extend the repayment over a longer period of time obtain a lower monthly payment. However, borrowers who consolidation will likely increase the overall cost of the loan because of the increased number of payments.
A Federal Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. Repayment options vary.