Parents are forced today to opt for different student loan options to help children complete their education. Especially during these tough economic times, students find themselves stuck with one or more student loans that they are unable to manage and pay every month. Federal Loan Consolidation was introduced to help students consolidate and bring all their student loans under one umbrella.

This Direct Loan Consolidation is offered by the US Department of Education, to reduce strain for borrowers and streamline their loans into a single repayment program. Borrowers are offered extended repayment terms thereby reducing the amount they have to pay every month and making their budget manageable.

Students who have dropped before half-time, left school or have graduated can consolidate their Stafford loans. PLUS loans on the other hand can be consolidated after they have been disbursed completely. Direct loan consolidation repayment starts 60 days after the disbursal of loan.

Loans that are eligible for consolidation include the Student PLUS loans, Parent PLUS loans, unsubsidized and subsidized Stafford loans and Perkins loans. Eligibility does not take into account whether the loan is from the Federal Direct Loan Program (FDLP) or the Federal Family Education Loan (FFEL).

It is not possible to consolidate Perkins loan by itself. It can only be clubbed with another eligible loan. Similarly, private loans are not eligible for direct loan consolidation. They can be consolidated only through a commercial lender.

As the direct loans servicing center will tell you, if you are delinquent or have defaulted in your payments, you can consolidate such loans only after fulfilling certain requirements. This requires you to make at least three voluntary, on time, consecutive payments to existing lender prior to applying for consolidation.

Defaulters can also consolidate loans under the FDLP Income Contingent Repayment Plan where their income, amount borrowed and size of family are taken into account to adjust monthly payment amount.