Special Direct Consolidation Information Special Direct Consolidation Information

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Special Direct Consolidation FAQ

What is the Special Direct Consolidation Loan opportunity about?
Special Direct Consolidation Loans are part of President Obama's "Help Americans Manage Student Loan Debt" initiative. A Special Direct Consolidation Loan centralizes your eligible federal loans under one servicer so you can better manage your payments without extending your repayment term and paying more in interest over time.
How are Special Direct Consolidation Loans different from traditional Direct Consolidation Loans?
For the differences in the two types of Direct Consolidation Loans, please visit www.studentaid.ed.gov/specialconsolidation.
Why should I consider applying for a Special Direct Consolidation Loan?

Special Direct Consolidation Loans offer several advantages. For example:

  • A Special Direct Consolidation Loan allows you to centralize all of your eligible federal loans under one federal loan servicer, so that you will have a single monthly payment.
  • If you consolidate into a Special Direct Consolidation Loan, you'll receive a 0.25% reduction in the current interest rate on the loans you consolidate as of the date of consolidation. This lower rate will be fixed for the life of the Special Direct Consolidation Loan and cannot exceed 8.25%. You also qualify for another 0.25% interest rate reduction if you sign up for Direct Debit, our automatic payment service.
  • If you've already made qualifying payments toward the requirement for Income-Based Repayment (IBR) loan forgiveness prior to consolidation, those payments will count toward the remaining payments required for IBR loan forgiveness on your Special Direct Consolidation Loan, if you remain in IBR. Under IBR, you receive forgiveness for any remaining loan balance after 25 years of qualifying payments.
  • By consolidating into the Direct Loan Program you become eligible for loan forgiveness under the Public Service Loan Forgiveness Program, if you meet the program eligibility requirements. Under the Public Service Loan Forgiveness Program, you receive forgiveness of any remaining balance on your eligible Direct Loans after you have made 120 qualifying payments while employed full-time by a public service organization.
  • A Special Direct Consolidation Loan brings the loans you consolidate current if they are delinquent at the time of the consolidation, as long as the loans are not in default (270 days or more delinquent).
When can I apply?
You can apply any time between mid-January and June 30, 2012.
Am I eligible?

To be eligible for a Special Direct Consolidation Loan, you must have at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan held by the U.S. Department of Education that is less than 270 days delinquent and at least one commercially-held FFEL loan. However, only your eligible commercially-held FFEL loans may be consolidated into a Special Direct Consolidation Loan.

If the U.S. Department of Education does not hold any of your loans, you do not meet the eligibility requirements for a Special Direct Consolidation Loan.

If you meet the eligibility requirements for a Special Direct Consolidation Loan, a federal loan servicer will contact you between mid-January and mid-June 2012.

If I'm eligible for a Special Direct Consolidation Loan, what should I do about making payments on the loans I plan to consolidate?
If required, continue making payments to your current loan holders for all commercially-held FFEL loans that you plan to consolidate. You should not stop making required payments until you have been notified that the Special Direct Consolidation Loan process has been completed.
What repayment options are available for Special Direct Consolidation Loans?

You can choose any of the following repayment plans to repay your Special Direct Consolidation Loan:

  • Standard Repayment Plan
  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Income Contingent Repayment (ICR) Plan
  • Income-Based Repayment (IBR) Plan

Note that if your Special Direct Consolidation Loan includes parent FFEL PLUS Loans that you obtained to pay for your child's education, or FFEL Consolidation Loans that repaid parent PLUS loans, the portion of your Special Direct Consolidation Loan that paid off those loan types may not be repaid under the IBR Plan. However, that portion of your loan may be repaid under the ICR Plan.

What is the repayment term for a Special Direct Consolidation Loan?
Each loan you consolidate will retain its original repayment term - the repayment term does not start over when you receive a Special Direct Consolidation Loan. That is, time you have already spent in repayment on the commercially-held FFEL Program loans that you consolidate will count toward the repayment term for your Special Direct Consolidation Loan. For example, if you have already made 3 years of loan payments under a 10-year Standard Repayment Plan before consolidating a Federal Stafford Loan, and you choose the Standard Repayment Plan for your Special Direct Consolidation Loan, your remaining repayment term will continue to be 7 years.
What is the interest rate?
The interest rate on your Special Direct Consolidation Loan will be a fixed rate that is 0.25% less than the current rate on the loans you are consolidating, not to exceed 8.25%. The rate on your Special Direct Consolidation Loan will be fixed for the life of the loan, even if your current loans have a variable interest rate. You also qualify for an additional 0.25% interest rate reduction if you sign up for Direct Debit, our automatic payment service. If you consolidate multiple loans that have different interest rates, you will have different fixed interest rates on different parts of your Special Direct Consolidation Loan.
What loans can I consolidate into a Special Direct Consolidation Loan?

ELIGIBLE FOR CONSOLIDATION

  • Commercially-held FFEL Subsidized and Unsubsidized Stafford Loans
  • Commercially-held FFEL PLUS Loans (both those taken out by graduate/professional students and those taken out by a parent to pay for the costs of an undergraduate student)
  • Commercially-held FFEL Consolidation Loans

To be eligible for consolidation, these loan types must be in grace, repayment, deferment, or forbearance status at the time you apply for a Special Direct Consolidation Loan.

NOT ELIGIBLE FOR CONSOLIDATION

  • Commercially-held FFEL loans that are in default or subject to a bankruptcy proceeding
  • FFEL loans that are owned by the U.S. Department of Education
  • Direct Loan Program loans
  • Perkins Loans
  • Health Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Nursing Student Loans (NSL), Loans for Disadvantaged Students (LDS)
  • Private education loans
Will my payments be lower?

It depends on the repayment plan you choose.

You'll receive more detailed information about the available repayment plans when we (or another federal loan servicer) notify you that you are eligible for a Special Direct Consolidation Loan. If you decide to consolidate, we'll work with you to determine the repayment plan that best meets your needs.

Can I consolidate my private education loans and my federal loans through this program?
No. Private education loans cannot be consolidated into either a Special Direct Consolidation Loan or a traditional Direct Consolidation Loan.
Am I required to consolidate all of my eligible commercially-held FFEL loans?
No. You may choose to keep some of your commercially-held FFEL loans with their current servicer. As with a traditional Direct Consolidation Loan, you control which loans you consolidate.
What if I forgot to include all of the loans I want to consolidate on my application?

Complete the Federal Direct Consolidation Loan Request to Add Loans Form and mail, fax, or email the completed form to:

FedLoan Servicing
P.O. Box 69184
Harrisburg, PA 17106-9184

Fax: 717-720-1628
Email: SDCLHelp@MyFedLoan.org

Don't forget to complete and return pages 1 and 2. Also, please keep a copy for your records.

I am in school. Can I obtain a Special Direct Consolidation Loan?
You cannot consolidate loans that are in an "in-school" status (that is, loans that have not yet entered the grace or repayment period). However, you may consolidate loans that are in an in-school deferment status (loans that previously entered repayment and were placed in an in-school deferment status when you returned to school on at least a half-time basis).
My loans are in grace. Can I still apply for a Special Direct Consolidation Loan?

Yes. If your loans are in a grace period, you can apply; however, your grace period will end when the consolidation is complete, and you must then begin making payments on your Special Direct Consolidation Loan.

If some of your loans are in a grace period and some of your loans are not in a grace period, you may want to consider consolidating the loans that are not in a grace period and then adding the loans that are in a grace period at a later time. You will have 180 days after your Special Direct Consolidation Loan is disbursed to add other eligible loans to the consolidation. You will receive more information about this option when we (or another federal loan servicer) notify you that you are eligible for a Special Direct Consolidation Loan.

What if my loans are delinquent or in default?
You may consolidate loans that are less than 270 days delinquent. However, loans that are in default (270 or more days delinquent) cannot be consolidated into a Special Direct Consolidation Loan.
I'm currently postponing payments through a deferment/forbearance. Can I still apply?
Yes. Loans that are in a deferment or forbearance status may be consolidated into a Special Direct Consolidation Loan.
Will my deferment or forbearance transfer to the new loan?
Yes. Your current deferment or forbearance will transfer to your new Special Direct Consolidation Loan.
I recently applied for a traditional Direct Consolidation Loan. Is it now too late to cancel that application and apply for a Special Direct Consolidation Loan?

The answer to this question depends on whether Step 4 - Loan Statement of the traditional Direct Consolidation Loan process has been completed.

If you have… You may…
Received your loan statement and the 15-day period during which you may make adjustments has passed Not Cancel the traditional application
Received your loan statement and the 15-day period during which you may make adjustments has not passed Cancel the traditional application
Not yet received your loan statement Cancel the traditional application

For further assistance, visit http://loanconsolidation.ed.gov.

With my current servicers, I have my monthly loan payments automatically debited from my bank account. Will this payment method transfer to my new Special Direct Consolidation Loan?
No. You must complete a new application for automatic payment debiting with the servicer of your Special Direct Consolidation Loan. Remember that if you choose this option you will receive an additional 0.25% reduction in the interest rate on your Special Direct Consolidation Loan.

Account Access

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Add a Loan

Already applied for a Special Direct Consolidation and want to add a loan to your application? Complete the Federal Direct Consolidation Loan Request to Add Loans Form.

Don't forget to complete and return pages 1 and 2. Also, please keep a copy for your records.

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