Should You Consolidate Your Student Loans if You Want Public Service Loan Forgiveness (PSLF)?

Student loans are expensive – and they aren’t getting any cheaper. Thankfully, the Public Service Loan Forgiveness program, or PSLF, offers students who plan to use their degrees for nonprofit or public service purposes a way to get their loans wiped out if they meet certain criteria.

If you work more than 30 hours a week at a qualified nonprofit or in certain public service fields and make 120 qualified, on-time payments for the full amount listed on your statement, the government will forgive many types of federal student loans. That means no more payments after as little as 10 years.

Many students end up with more than one student loan and consolidating those loans into one may seem like an attractive option. If you’re hoping to get your loans forgiven, however, the process is a bit more complicated.

What is Direct Loan Consolidation? How Does it Affect PSLF?

When you have federal student loans, consolidation via the Direct Consolidation Loan program can combine them into one. Instead of making multiple small payments, you’ll make one payment per month. It can be a lot more convenient, lower your monthly payment, and put your entire loan balance under one servicer. If you have loans other than those through the Direct Loan program, it may make those loans eligible for PSLF as well.

There are several downsides, however. When you consolidate student loans, if you stretch out your repayment term, you will make payments for a longer period – costing you more in the long run due to accrued interest.

Consolidation also greatly affects PSLF eligibility. To qualify for PSLF, you need to make 120 payments on each of your current loans. If you consolidate them, those loans no longer exist. Instead, they are now one big new loan, with the original loans having been paid off.

That means if you’ve been making payments toward your 120-payment amount for PSLF, and then you consolidate your loans, you will lose any credit. You will have to start over with the new loan.

Note: Private student loans are not eligible for the Direct Consolidation Loan program. Instead, borrowers ​with private student loans could look into private student loan consolidation, also known as student loan refinancing. 

How Can You Consolidate Student Loans and Still Get PSLF?

You may have multiple loans with payments spread over multiple federal loan servicers. While you want to be eligible for PSLF, perhaps you also can’t imagine having to deal with all the extra hassle of several different loans for the next 10 years. The good news is you can still do both.

If you’re in your grace period immediately following graduation, or you’ve just started making payments, go ahead and consolidate immediately. You’ll then have one loan to make payments on. Next, as soon as you’re employed with a qualified nonprofit, have your human resources representative certify your employment with them, using the PSLF Employment Certification Form.

Keep making your qualifying payments on the one new loan. When you’ve made 120 payments, submit the PSLF Application to receive the loan forgiveness. You’ll still need to be employed with a nonprofit —both when you apply, and when the forgiveness is granted.

If you’ve already made a significant number of payments but still want to consolidate, you’ll need to gauge whether the added convenience of consolidation is worth the progress you’ll lose toward your PSLF eligibility. You may decide that dealing with multiple servicers and interest rates isn’t nearly as annoying as losing all the credit for payments you’ve already made toward PSLF.

What if You Have More Questions?

The StudentAid.gov website has detailed question-and-answer sections for both federal loan consolidation and the PSLF program. There are also a variety of numbers staffed with people who can discuss your specific situation.

Be aware, however, that they can only discuss those issues with you or those you have designated to have access to your account. So, if you want your parents to call for you, make sure you’ve already given them access.

Consolidation doesn’t have to completely ruin your chances for loan forgiveness. You’ll just need to navigate the system in a smart way to ensure that you’re covering all the bases.