Direct Consolidation Loan

DEFINITION of 'Direct Consolidation Loan'

A loan that combines two or more federal education loans into a single loan. A Direct Consolidation Loan allows the borrower to make a single monthly payment. The loan is facilitated by the U.S. Department of Education and does not require borrowers to pay an application fee.

BREAKING DOWN 'Direct Consolidation Loan'

A Direct Consolidation Loan allows borrowers to lower the number of loan payments they have to make each month, combining them into a single payment. Most federal loans are eligible for consolidation, but private loans are not eligible. Borrowers can consolidate once they complete school, leave school or fall below half-time student status.

Before considering a Direct Consolidation Loan, it is important to consider any benefits associated with the original loans, such as interest rate discounts and rebates. Once the loans are rolled into a new loan, those benefits are lost. Additionally, if the new loan increases the repayment period, the borrower may wind up paying more interest.

RELATED TERMS
  1. Student Loan Forgiveness

    Under certain circumstances, federally backed student loans – ...
  2. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  3. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  4. Loan Constant

    An interest factor used to calculate the debt service of a loan. ...
  5. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  6. Loan Officer

    Representatives of banks, credit unions and other financial institutions ...
Related Articles
  1. Credit & Loans

    Student Loans: Federal Loan Consolidation

    Federal loan consolidation is a helpful tool for converting an unmanageable payment into a manageable payment by combining multiple semester loans into one loan and extending your repayment schedule. ...
  2. Credit & Loans

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  3. Credit & Loans

    Student Loan Debt: Is Consolidation The Answer?

    Consolidating student loans entails taking out a new loan to pay off existing loans. It sounds simple, but there are a few things to keep in mind.
  4. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  5. Credit & Loans

    Debt Consolidation: When It Helps, When It Doesn't

    Here's the smart way to use a debt consolidation to get your financial life back on track
  6. Credit & Loans

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  7. Credit & Loans

    Parents: Beware of Taking Out a Direct PLUS Loan

    Direct PLUS loans are heavily advertised to parents who want to help support the financial costs of their child's education, but are they a good idea?
  8. Professionals

    Types of Financial Aid and College Loans

    Types of Financial Aid and College Loans
  9. Professionals

    Introduction To Loans

    Learn about the many types of loans and how they function in business.
  10. Credit & Loans

    Student Loans: Private Loans

    While federal loans should always be your first borrowing choice, they may not cover your full tuition – never mind lab fees, books, and room and board. That's where private loans come ...
RELATED FAQS
  1. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
  2. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  3. What are some examples of debts that I can consolidate?

    Read about different kinds of debts than can be combined into a consolidation loan, including unsecured debts, secured debts ... Read Answer >>
  4. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  5. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  6. Can Sallie Mae loans be consolidated?

    Understand whether Sallie Mae loans can be consolidated. Learn about additional options that can lower the monthly payments ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center