Planning to consolidate your federal loans? Here’s what to know before the April 1 and July 1 deadlines hit.
Signed into law last year, the Budget Reconciliation Act limits repayment plan availability & loan forgiveness access for new borrowers as of July 1, 2026. It’s important to note you’ll be labeled a new borrower if you consolidate your federal loans on or after July 1, 2026.
Consolidation is the process of combining one or more federal student loans into a Direct Consolidation Loan. Even if you’re done with school and don’t plan to borrow any more loans, simply consolidating your loans after July 1, 2026 will place you into the “new borrower” category.
In the past, borrowers often chose to consolidate because it allowed them to access more affordable repayment plans or loan forgiveness programs. Consolidation also offers a path back into good standing for borrowers with defaulted student loans. But consolidation will soon result in fewer, not more, repayment options for existing borrowers.
Most borrowers who consolidate their loans after July 1, 2026 will only have two repayment plan options: the revised Standard Repayment Plan and the new Repayment Assistance Plan (RAP). Parent PLUS loan borrowers will only be able to use one plan: the Standard Repayment Plan.
Parent PLUS loan borrowers who wants access to income-driven repayment or loan forgiveness. Consolidation is necessary for you to gain and retain access to IDR plans and/or loan forgiveness options. Parent PLUS loans that haven’t been consolidated by July 1st will not have access to IDR plans and won’t be eligible for any loan forgiveness programs, including Public Service Loan Forgiveness (PSLF).
Borrowers with non-Direct federal loans, such as FFEL loans or Perkins loans who want access to loan forgiveness: If you’re trying to make your loans eligible for forgiveness, consolidation is required to convert your loans into eligible Direct loans.
Borrowers with federal loans in default: If you have defaulted student loans, you may be considering consolidation as an option to quickly return your loans to good standing. If consolidation is better for you than rehabilitation (the other option to get your loans out of default that can also help repair credit) it’s important to act fast to avoid limiting your future repayment options.
It may take up to 90 days from the date you apply before your consolidation loan is disbursed. The Department of Education set a deadline to submit your consolidation application prior to April 1, 2026 to ensure that your consolidation loan is disbursed before July 1, 2026.
If your consolidation loan is disbursed prior to July 1, 2026 (and you don’t borrow any new federal loans after that date), you’ll still have access to all existing repayment plans - Standard, Graduated, Extended, and the IDR plans: IBR, ICR and PAYE. (Note: ICR and PAYE will eventually be phased out in 2028). You’ll also be able to access the new Repayment Assistance Plan (RAP) plan starting this July.
But if your consolidation loan is disbursed on or after July 1, 2026, you will only have two repayment plan options: the revised Standard Repayment Plan, which is not eligible for loan forgiveness) and the RAP plan (except Parent PLUS), which may result in higher payments than other IDR plans, depending on your income.
Consolidation is a highly individualized decision. If you have questions about whether consolidation is the best option for you, please reach out to a student loan coach to discuss your options.
If you have Tuition.io: our student loan coaches are available to help you choose the best repayment plan and navigate the process. Log in to Tuition.io to schedule a 1:1 with a coach.
For the latest student loan updates, follow us on Linkedin.