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 loan. The Direct consolidation loan would then be eligible for Public Service Loan Forgiveness (PSLF) or more than one income-driven repayment (IDR) plan.
It’s important to note that a consolidation loan is considered a new loan. If you consolidate a loan, any previous payments toward IDR or PSLF will disappear. This is why we don’t recommend consolidating Direct loans into a new Direct Consolidation loan.