Repayment after the 2025 law · guide
Direct Consolidation Loans after the 2025 law
A Direct Consolidation Loan made on or after July 1, 2026 can be repaid only under the Repayment Assistance Plan or the Tiered Standard plan. That sentence, from section 455(g)(3) of the Higher Education Act as amended in 2025, changes the old logic of consolidation. Before, consolidating could open income-driven plans and was a routine step for FFEL borrowers, parents with PLUS loans and anyone with a tangle of loans at several servicers. Now it still combines loans into one, at a fixed rate based on the weighted average of the old rates, and it still makes FFEL loans eligible for RAP. But it also closes IBR for good on the loans it repays, because the new loan is a loan made after July 1, 2026. For parents, the rules are tighter: a consolidation that repaid a parent PLUS loan cannot use RAP at all, and keeps access to IBR only if it is repaid under ICR, PAYE or IBR at least once before June 30, 2028. Consolidating can carry PSLF progress forward, as a weighted average of qualifying payments.
Two loans into one: rate and term
Weighted average rate
7.383%
| Combined balance | $40,000 |
| Tiered Standard, 15 years | $368 |
| Plans open to the new loan | RAP or Tiered Standard |
Before the rounding the Department applies to the consolidation rate.
Consolidation combines federal loans into one Direct Loan. Since July 1, 2026 it also changes which repayment plans you can use.
Checked by Radif Partners · Editorial policy · How we calculate
Which plans a consolidation loan can use
| Consolidation loan | Plans available |
|---|---|
| Made before July 1, 2026, no parent PLUS inside | RAP, IBR, fixed plans of the old menu; PAYE or ICR until June 30, 2028 for current enrollees |
| Made on or after July 1, 2026, no parent PLUS inside | RAP or Tiered Standard only |
| Repaid a parent PLUS loan, made before July 1, 2026 | Standard plans; ICR until June 30, 2028; IBR if repaid under ICR, PAYE or IBR at least once by then |
| Repaid a parent PLUS loan, made on or after July 1, 2026 | Tiered Standard only |
What consolidation still does well
It puts several federal loans, possibly at several servicers, into one loan with one payment and one due date. It turns FFEL and Perkins loans, which do not qualify for RAP or PSLF, into a Direct Loan that does. It is one of the two routes out of default, alongside rehabilitation, and the Department's own guidance to defaulted borrowers who want the auto pay rate reduction starts with consolidation. And, on a new consolidation, it lets a borrower who expects to use RAP anyway manage everything under one plan.
Consolidation also resets the Tiered Standard term to the total balance. Combining $18,000 and $22,000 of loans produces a $40,000 loan, in the 15-year tier, at a weighted rate around 7.38% if the rates were 6.53% and 8.08%: about $368 a month. That lower payment comes with a longer term, so the total interest goes up unless you pay more than required.
What consolidation now closes
A consolidation made on or after July 1, 2026 is a new Direct Loan, and the borrower then falls under the rule for anyone with a loan made after that date: RAP or Tiered Standard for all their Direct Loans. A borrower who was planning to use IBR, perhaps because a low income makes IBR cheaper than RAP or because they are close to IBR forgiveness, loses that option on the loans consolidated. Borrowers with a long IBR history should count their qualifying payments before doing anything. Payments made under IBR do count toward RAP's 360 qualifying payments, but RAP forgives later than IBR.
Parents and the excepted consolidation loan
The regulation calls a consolidation that repaid a parent PLUS loan an excepted consolidation loan. It is excluded from IBR and RAP, with one exception that matters a great deal to parents: it is not treated as excepted, and remains eligible for IBR, if at least one payment was made on it under ICR, PAYE or IBR on any date from July 4, 2025 through June 30, 2028 (34 CFR 685.209(b)(6)(ii)). Until June 30, 2028, such a consolidation can choose ICR, provided the parent has no Direct Loan made on or after July 1, 2026. A consolidation disbursed on or after July 1, 2025 that repaid parent PLUS loans can choose only ICR among income-driven plans in that period. The route therefore runs: consolidate, enter ICR, make a payment, and keep IBR access after ICR ends. Consolidating after June 2026 produces a loan made after that date, which the regulation excludes from the ICR option. The parent PLUS repayment page walks through it.
PSLF counts and consolidation
Consolidating Direct Loans does not wipe PSLF progress. The regulation counts, on the new consolidation loan, the weighted average of the qualifying payments made on the Direct Loans it repaid, including a parent PLUS loan (34 CFR 685.219(c)(3)). The weighting can cut both ways: combining a loan with 80 qualifying payments and a larger loan with 10 produces a count much closer to 10. Public servants with loans at very different stages should think twice before consolidating them together. Consolidating FFEL loans is different: it is necessary for PSLF at all, and the safest course is to do it as early as possible so that qualifying payments start counting.
Consolidation as a way out of default
A defaulted federal loan can be consolidated into a new Direct Consolidation Loan, which ends the default and puts the borrower back in repayment on a new plan. Since July 1, 2026 that plan is RAP or Tiered Standard for a new consolidation. The Department's guidance on the auto pay reduction tells defaulted borrowers to do exactly that: consolidate their eligible loans, apply for a repayment plan, then enroll in auto pay (Department of Education, June 18, 2026). Rehabilitation is the other route; it keeps the original loans and, from July 1, 2027, can be used a second time. Each route has its own conditions, set out on the default and rehabilitation page. Borrowers in default should also know that RAP accepts defaulted Direct Loans, so a payment plan can sometimes be set without consolidating at all.
Interest at consolidation
Outstanding interest on the loans you consolidate becomes part of the principal of the new loan, so later interest is charged on it. That is one reason to pay accrued interest before consolidating if you can. It also raises the principal used to set your Tiered Standard term. The interest calculator estimates what has accrued, and the plan comparator shows RAP and Tiered Standard on the combined balance.
Before you apply
List every federal loan with its type, servicer, rate, date of first disbursement and plan. Mark the ones made before July 1, 2026 and decide whether you want to keep IBR on them. Check PSLF counts on each. If a parent PLUS loan is involved, note the June 30, 2028 window. You can consolidate only some of your loans; nothing requires putting all of them into the new loan. A borrower who keeps older loans out of a consolidation should know that the Department may still treat them under the new menu once any loan made after July 1, 2026 exists in their name, as the statute ties the plan menu to the borrower, not to each loan (HEA section 455(d)(7)(A)).