Fortunately, though, these loans can become eligible, if consolidated through the Federal Direct Consolidation Loan!
Notably, an existing post-2010 Direct Federal loan program can also be consolidated under the Federal Direct Consolidation program, though it doesn’t result in any better, or worse, eligibility or treatment for flexible Federal repayment programs (though consolidation could adversely impact industry-specific service-based repayment programs, such as HRSA for nurses)
The caveat, however, was that only Direct Federal loans were eligible for the most generous payment and forgiveness programs like PAYE and PSLF.
Since 2010, the Treasury took over the entire Federal student loan program, and FFEL was phased out for new loans beginning after . Which means that all Federal student loan programs since mid-2010, including subsidized and unsubsidized Stafford Loans, PLUS loans (made directly to students), and more, have been potentially eligible for at least some Federal flexible payment programs.
However, many former students still hold FFEL loans that were taken out prior to 2010, which were not eligible for certain payment programs originally. In other words, various FFEL loans that were not eligible for flexible repayment programs, including potential loan forgiveness after 10 or 20 years of repayment (e.g., under PSLF, PAYE, or REPAYE), can become eligible if they go through a Federal Direct Consolidation Loan (though only for loans of the student, not PLUS loans taken out by parents, and the repayment plan options will not include PAYE for those who had a student loan balance prior to ).
Notably, though, these improved repayment options are only available if the consolidation is done under www.guaranteedinstallmentloans.com/payday-loans-la the Federal Direct Consolidation Loan program, and is generally only available if it is the original FFEL loan. (Though if the old FFEL loan was being repaid under IBR and several years into its 25-year forgiveness timeline, consolidation may reset the forgiveness time horizon when re-starting under a new flexible payment program.)
In certain circumstances, Federal Direct Consolidation is also available for an FFEL loan that is not the original loan (if it was consolidated into a special FFEL Consolidation Loan program that existed prior to ), and Perkins Loans may also potentially be consolidated with Federal Direct (even though they’re not actually part of FFEL).
The significance of these rules is that not only can older student loans under FFEL potentially become eligible for more favorable loan terms by consolidating, but private loans are not eligible, and going through the process of refinancing a Federal loan into a private loan will irrevocably lose access to these programs. Again, the reason is that the Federal Direct Consolidation Loan program is only available for existing Federal loans; private loans are not eligible, including prior Federal loans that were refinanced into private loans. Furthermore, if an existing Federal student loan taken out since 2010 and thus already potentially eligible for flexible payment programs is refinanced into a private loan, access to those favorable payment programs are also permanently lost.
Prior to 2010, Federal student loans were administered by a combination of the Federal government itself (which provided some Direct loans) and the Federal Family Education Loan (FFEL) program, which facilitated Federal loans through private company lenders
In other words, just as a Federal Direct Consolidation Loan can turn an ineligible FFEL loan into an eligible Federal loan for unique repayment and forgiveness options, refinancing from a Federal loan into a private one can forfeit these opportunities! Which means even if a private loan offers a slightly better interest rate and especially if it does not it can be very damaging to refinance Federal student loans!
It may still be desirable to do so simply for some level of administrative convenience. However, if multiple Direct loans have different interest rates, it may be preferable to keep them separate, to allow any prepayments to be directed to the highest interest rate loan first (as a Consolidated version would be subject to one blended interest rate).