Update: As of February 18, 2025, a federal court issued an injunction that requires a pause on Direct Consolidation Loans being credited with a weighted average of payments based on the count of the underlying loans.
Federal loans of various types can be combined into a consolidation loan. The loan will stay a federal loan, and the interest rate will not change significantly - the weighted average is typically rounded up to the nearest eighth of a percent. When you consolidate, you’re able to select a new servicer for the new loan.
“Consolidation” can be a bit of a misnomer - it can mean combining multiple loans into one, but it can also be used to change an older loan type, like FFEL or Parent PLUS loans, into a new Direct Consolidation Loan with access to more federal loan programs such as Public Service Loan Forgiveness (PSLF) or income-driven repayment (IDR).
It’s important to note that a consolidation loan is considered a new loan. As of July 2024, Direct Consolidation Loans will be credited for a weighted average of payments based on the count of the underlying loans, whereas previously, consolidating meant that any progress toward forgiveness was lost.