How to Consolidate Student Loans for PSLF

‍Borrowers can consolidate their federal student loans to qualify for the Public Service Loan Forgiveness Program using a paper application or online at studentaid.gov.

Public Service Loan Forgiveness promises tax-free student loan forgiveness for people who work full-time for the government or a nonprofit. The program can help you if all of your federal student loans are Direct Loans. But if you have FFEL Loans or Perkins Loans, you need to consolidate them into the Direct Loan Program first. Private student loans aren’t eligible.

Ahead, learn how to consolidate student loans to qualify for the Public Service Loan Forgiveness (PSLF) Program.

Related: Should I Consolidate My FFEL Loans to Direct Loans?

You can apply for a Direct Consolidation for free by submitting a consolidation loan application to the student loan servicer responsible for handling the program for public servants: FedLoan Servicing.

Follow these three steps to consolidate your student loans to qualify for Public Service Loan Forgiveness.

• Step 1 – Find out what type of loans you have. Visit studentaid.gov to see if you have loans made under the Federal Family Education Loan or Perkins Loan Program. Those are the loans you’ll need to include in your consolidation application. Take note, FFEL Joint Spousal Consolidation Loans can’t be consolidated into a Direct Consolidation Loan — even if both spouses work in public service.

• Step 2 – Apply for consolidation. You can apply online at Federal Student Aid or by mail or fax. The application is free. While applying, you can pick the repayment plan and loan servicer. If you’ve already made 120 monthly payments on the loans you’re consolidating, you can put your new loan into forbearance. The new loan will have a fixed interest rate for the life of the loan. The new interest rate will be the weighted average of the interest rates on the loans you’re consolidating, rounded up.

• Step 3 – Review the loan summary statement. About two weeks before the new Direct Consolidation loan is disbursed, the servicer will send you The Loan Summary Statement. That letter will provide you with the new loan balance, interest rate, and repayment terms, including the monthly payment amount. Have concerns about the information on the summary? You can cancel your application within 10 business days of receiving the statement.

The consolidation process takes about six weeks to complete. You can submit the PSLF form before or after getting the new loan.

Learn More: Is Student Loan Consolidation a Good Idea?

The PSLF Program, which began in October 2007, promises tax-free loan forgiveness to borrowers who work 10 years in public service jobs and make regular payments — 120 qualifying payments in total.

This seems like a clear-cut proposition. But in practice, many public servants who believed they qualified learned they weren’t eligible because they had the wrong types of federal student loans or paid their loans under the wrong plan.

The US Department of Education rejected the applications of more than 98 percent of those who applied.

Lawmakers tried to fix the program by creating the Temporary Expanded Public Service Loan Forgiveness Program. But TEPSLF was troubled by the same complexity that made the original initiative ineffective. And it didn’t fix the wrong loan problem. Help was limited to borrowers who made payments under the wrong type of repayment plan.

For years, the Education Department resisted giving borrowers credit for their payments towards ineligible loans, insisting it lacked the authority to do so. But in late 2021, under cover of the coronavirus pandemic, the department used the Heroes Act to temporarily relax the program’s rules in times of national emergency.

This limited relief fixes both the wrong loan and the wrong repayment plan problem. It gives borrowers credit toward forgiveness for payments made on FFEL and Perkins Loans and payments made under ineligible repayment options. The PSLF Waiver will also automate eligibility for federal employees and allow months spent on active duty to count toward PSLF, even if the service member’s loans were on a deferment or forbearance rather than in active repayment.

To get retroactive credit for previously ineligible student loan payments, borrowers who still have FFEL or Perkins loans need to do two things:

• Submit a federal Direct Consolidation Loan application that includes the non-Direct Loans.

• Submit employment certification forms from every qualifying employer they’ve worked for since October 2007.

Parent PLUS Loans aren’t eligible for the waiver.

Learn More: What is Public Service Loan Forgiveness?

You’ll need to consolidate your loans to qualify for Public Service Loan Forgiveness if you have FFEL or Perkins Loans. Parent PLUS Loan borrowers may also need to consolidate so they can qualify for a PSLF eligible-repayment plan: income-contingent repayment.

If all of your loans are Direct Loans, consolidation may not be necessary. But you may still want to do so to have one loan servicer, one payment, and lower monthly payments.

What if the only loan I have is an FFEL Consolidation Loan? While it seems wonky, you can still consolidate the loan into a Direct Consolidation Loan — even if you don’t have any other loans to add to the application. What you’re effectively doing is refinancing the loan with the Education Department.

Learn More: Do FFEL Loans Qualify for PSLF?

You’re not alone if you’re unsure whether you should consolidate to take advantage of PSLF. It’s a confusing program with many rules that you have to follow strictly. Schedule a free 10-minute call with me to see how I can help.

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