Direct Consolidaton Loans

The Higher Education Act (HEA) provides for a loan consolidation program under both the Federal Family Education Loan (FFEL) Programs and the Direct Loan Program (DLP). Under both of these programs, your loans are paid off and a new consolidation loan is created. These consolidation programs simplify loan repayment by combining several types of your Federal education loans (that may have different terms and repayment schedules or may have been made by different lenders) into one new loan.

The interest rate on your new consolidation loan may be lower than on one or more of your other loans. The monthly payment amount on a school consolidation loan is usually lower and the amount of time to repay may be extended beyond what was available in your separate loan programs. These features should result in more manageable debt and should make you less prone to default.

Direct Consolidation Loans allow you to combine one or more of your Federal education loans into a new loan that offers several advantages.

One Monthly Payment to One Lender
With only one lender and one monthly bill, it is easier than ever for you to manage their debt. You have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.

Your Repayment Options
You can choose from four different plans to repay your Direct Consolidation Loan, including an Income Contingent Repayment Plan. These plans are designed to be flexible to meet your needs. With a Direct Consolidation Loan, you can switch repayment plans at anytime.

No Minimum or Maximum Loan Amounts or Fees
There is no minimum amount required to qualify for a Direct Consolidation Loan and consolidation is free.

Varied Deferment Options
With your Direct Consolidation Loan you may qualify for renewed deferment benefits. If you have exhausted the deferment options on your current Federal education loans, a Direct Consolidation Loan may renew many of those deferment options. In addition, you may be eligible for additional deferment options if you have an outstanding balance on a FFEL Program loan made before July 1, 1993, when you got your first Direct Loan.

Reduced Monthly Payments
A Direct Consolidation Loan may ease the strain on your budget by lowering your overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on your Federal education loans.

Retention of Subsidy Benefits
There are two possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. You retain your subsidy benefits on loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.

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.

You 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.

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..

If you only have a Direct Consolidation Loan you cannot consolidate again unless you  include an additional loan.

The consolidation process generally takes 60-90 days. Using an on line Web application can reduce the amount of time it takes to consolidate your loan.

You will receive bills from the Direct Loan Servicing Center within 60 days of the first disbursement of their Direct Consolidation Loan.

You will receive monthly billing statements from the Direct Loan Servicing Center, unless you enroll in the Electronic Debit Account (EDA).

You will receive a 0.25 percent discount on your interest rate for as long as you continue to make payments using EDA.

You must keep the Direct Loan Servicing Center informed of changes to your address and if you change your name. You are responsible for making payments on time regardless of whether you receive billing statements. You need to send your payments to:

You may prepay all or part of the unpaid balance on any Direct Loan at any time, without an early repayment penalty. If you make a payment that exceeds the required monthly payment, the prepayment will be applied first to any charges or collection costs, then to outstanding interest, and last to principal. However, if your account has no outstanding interest, the prepayment is applied entirely to principal. If the prepayment is twice your monthly payment, the next payment due date is advanced unless specified otherwise. You will be notified of a revised due date.