A Simple Way to Manage Education Debt Direct Consolidation Loan
Through loan consolidation, you can combine some or all of your
outstanding student loans into one consolidated loan. Loan consolidation
may extend your repayment period, eliminate the hassle of dealing with
multiple lenders, allow you to repay your loan as a share of your income,
and - in many cases - give you a break on interest costs. Loan
consolidations are available from the Department of Education's Direct
Loan program, as well as private lenders participating in the
Department's government-guaranteed (FFEL) loan program.
Why should I apply now?
If you apply for a consolidation loan from the Direct Loan program before
January 31, 1999, you will receive a lower interest rate for the life of
your loan. This rate is much lower than the rate on most existing Direct
and FFEL loans, as well as the maximum allowable rate on FFEL
consolidation loans (although FFEL lenders may charge a lower rate if
they choose), Under this lower interest rate, most students save about
$50 per $1,000 of debt over the life of their loans.
What is the lower interest rate that is available now?
If you apply now, your loan will have an interest rate of 7.46 percent this year. Although the interest rate is recomputed annually, it will be based upon a lower interest rate formula for. the life of your loan.
Under a law just passed by Congress, this low rate is only available if
you apply before January 31, 1999. If you apply on or after February 1.
1999, the interest rate on your direct cousolidation loan will be
calculated the same way the maximum allowable rate on FFEL consolidation
loans is calculated today: based upon a weighted average of the
interest rates of your original loans. This post-January rate will be
less favorable for most students compared to the rate available between
now and the end of January.
Where can I get a direct consolidation loan?
To apply for a loan consolidation through the Direct Loan program, please
call the Direct Loan Direct Loan origination center at 1-800-557-7392 and
ask for an application to be mailed to you or download an application
from "www.ed.gov/DirectLoan". If you have a FFEL loan, your lender may
provide the same low rate.
What if I'm still in school?
If you are in school, you may be able to consolidate your direct loans.
Unfortunately, under the new law, you cannot obtain a direct
consolidation loan before February 1999 if you are enrolled or accepted
for enrollment in school and you have an outstanding FFEL or Perkins
student loan.
What else do I need to know?
You do not have to include all of your student loans in your consolidation loan.
You may consolidate a single loan and/or an existing direct consolidation loan.
There is no consolidation fee and no minimum or maximum loan balance.
You may choose from a variety of repayment plans, including one based on your income
You may prepay your direct consolidation loan at any time.
A typical loan consolidation requires 60 to 90 days to process, largely because each of your lenders must respond to our request to verify your loan balance.