Denver Seminary

Okay, you're right. I'm playing pretty fast and loose with the words "new & exciting."  But in this day and age the graduate-level financial aid world does whatever it can to get pumped about new federal benefits for student loan borrowers.  This one is worth a look.

On October 25, 2011, the Obama Administration announced several steps it is taking to increase college affordability by making it easier to manage student loan debt (these steps are in addition to the previous creation of the Public Service Loan Forgiveness program).  Key initiatives include a “Pay As You Earn” repayment plan and a short-term consolidation opportunity ("Special Direct Consolidation Loans") that will be offered through the Department of Education (the Department) from January – June 30, 2012.  The press release and an accompanying fact sheet are available at http://www.whitehouse.gov/briefing-room/statements-and-releases.

Special Direct Consolidation Loans are not the same as traditional consolidation loans offered under the William D. Ford Federal Direct Loan (Direct Loan) Program.  Only certain borrowers will be eligible for Special Direct Consolidation Loans, and eligible borrowers will apply through a new and different online process.  In addition, Special Direct Consolidation Loans will only be available for a short period of time from January – June 30, 2012.

Getting Started – Special Direct Consolidation Loan High-Level Summary

Through four basic questions, we present high-level summary information about the process, borrower eligibility, loan eligibility, and benefits associated with Special Direct Consolidation Loans that will be available from January – June 30, 2012.  

How will the Special Direct Consolidation Loan Process work?

• Special Direct Consolidation Loans are not the same as traditional consolidation loans that borrowers can apply for today.

• Only certain borrowers will be eligible for Special Direct Consolidation Loans.

• Eligible borrowers will be contacted by one of four federal loan servicers starting in January 2012.  Given the number of eligible borrowers, these contacts will occur over several weeks.

• The servicers that will contact eligible borrowers are FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae.

• The servicers will provide eligible borrowers with application instructions.

• After receiving application instructions from a servicer, eligible borrowers will apply through a new and different online process.

• Borrowers who may be eligible must not apply through the traditional Direct Consolidation Loan Web site (http://loanconsolidation.ed.gov).

What loans must a borrower have to be eligible for a Special Direct Consolidation Loan?

• At least one ED-held Direct Loan or ED-held FFEL loan and one commercially-held FFEL loan.

What loans are eligible for Special Direct Consolidation?

• Only commercially-held FFEL loans (subsidized, unsubsidized, PLUS, and consolidation).

• Commercially-held FFEL loans must be in grace, repayment, deferment, or forbearance.

• Commercially-held FFEL loans can be defaulted loans that have been rehabilitated.

• Commercially-held FFEL loans cannot be in default or subject to a bankruptcy proceeding.

What will a borrower gain by obtaining a Special Direct Consolidation Loan?

• One servicer and one payment, as opposed to one or more servicers with multiple bills and varying repayment requirements.

• For commercially-held FFEL loans that will be consolidated, a 0.25 percent reduction from each loan's existing interest rate at the time of consolidation, plus the opportunity to receive an additional 0.25 percent interest rate reduction if automatic debit is chosen for repayment.

• For commercially-held FFEL loans with a variable interest rate at the time of consolidation, the conversion to a fixed interest rate at the lower percentage that will not change over time.

• No loss to previous time in repayment; it will count towards the repayment term for the new loan.

• No loss to previous Income-Based Repayment (IBR) payments; they will count towards the required repayment time for cancellation if the borrower remains in IBR.

• The commercially-held FFEL loans that will be consolidated will be eligible for discharge under the Public Service Loan Forgiveness Program.

Further Information

This summary information is further supplemented by the information available on our Special Direct Consolidation Loans Web page.

Information taken from www.ifap.ed.gov/eannouncements/102611SpecialDCLInfoInitial.html