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Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.
One Lender and One Monthly Payment
With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.
Flexible Repayment Options
Borrowers can choose from multiple plans to repay their Direct Consolidation Loan, including an Income Contingent Repayment Plan. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at anytime.
Varied Deferment Options
Borrowers with Direct Consolidation Loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a Direct Consolidation Loan may renew many of those deferment options. In addition, borrowers may be eligible for additional deferment options if they have an outstanding balance on a FFEL Program loan made before July 1, 1993, when they obtain their first Direct Loan.
Reduced Monthly Payments
A Direct Consolidation Loan may ease the strain on a borrower’s budget by lowering the borrower’s overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower’s Federal education loans.
Retention of Subsidy Benefits
There are two (2) possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.
Temporary In-School Consolidation Authority
During a one (1) year period, borrowers who meet certain requirements may consolidate loans that are in anin-school status into a Direct Consolidation Loan. Direct Consolidation Loans may be made under this temporary provision to borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011.
To qualify for Direct Consolidation Loans, borrowers must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment, or default status. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan.
Borrowers can consolidate most defaulted education loans, if they make satisfactory repayment arrangements with their current loan holder(s) or agree to repay their new Direct Consolidation Loan under the Income Contingent Repayment Plan or Income Based Repayment Plan.
Borrowers who do not have Direct Loans may be eligible for a Direct Consolidation Loan if they include at least one FFEL Loan and have been unable to obtain a Federal Consolidation Loan with a FFEL consolidation lender or have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them or intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program.
Borrowers who have only a Direct Consolidation Loan cannot consolidate again unless they include an additional loan.
No, Effective July, 1 2006 a married couple may no longer obtain a Direct Consolidation Loan as joint borrowers.
- You must not have had an outstanding balance on Direct Loans or Federal Family Education Loan (FFEL) Program loans as of Oct. 1, 1998, or on the date that you obtained a Direct Loan or FFEL Program loan after Oct. 1, 1998.
- If you are in default on a subsidized or unsubsidized loan, you are not eligible for forgiveness of that loan unless you have made satisfactory repayment arrangements with the holder of the defaulted loan.
- The loan(s) for which you are seeking forgiveness must have been made before the end of your five academic years of qualifying teaching service.
- Any time you spent teaching to receive benefits through AmeriCorps cannot be counted toward your required five years of teaching for Teacher Loan Forgiveness.
- You must have been employed as a full-time teacher for five complete and consecutive academic years, and at least one of those years must have been after the 1997–98 academic year.
- You must have been employed in an elementary or secondary school that
- is in a school district that qualifies for funds under Title I of the Elementary and Secondary Education Act of 1965, as amended;
- has been selected by the U.S. Department of Education based on a determination that more than 30 percent of the school’s total enrollment is made up of children who qualify for services provided under Title I; and
- is listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits. If this directory is not available before May 1 of any year, the previous year’s directory may be used.
Note: All elementary and secondary schools operated by the Bureau of Indian Education (BIE)—or operated on Indian reservations by Indian tribal groups under contract with BIE—qualify as schools serving low-income students. These schools are qualifying schools for purposes of this loan forgiveness program, even if they are not listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits.
- Your teaching service may qualify if the consecutive five-year period includes qualifying service performed after the 2007–08 academic year at an eligible educational service agency.
If your school meets the above requirements for at least one year of your teaching service, but does not meet these requirements during subsequent years, your subsequent years of teaching at the school may be counted toward the required five complete and consecutive academic years of teaching.
- Paying more in total interest,
- Having a larger total loan repayment amount,
- Extending your loan period – meaning Client will be paying longer,
- Losing borrower benefits from Clients current lender (i.e. interest rate discounts, rebates),
- Having to repay borrower benefits (i.e. rebates, fee waivers)
- Acquiring possible prepayment penalties and loss of grace period (if Client consolidates loans during their initial grace period)
What are my options?
Contact Student Loan Resolve to see exactly what your options are by consolidating your loans through the U.S. Department of Education. The U.S. Department of Education takes into account your family situation, your employment situation, and the amount of money you earn, etc.