Direct Loan Consolidation – The ultimate consolidation program
Direct Loan Consolidation can help improve a person’s monthly payments once he enters repayment by rolling one or more of his Direct Loans into one payment with one interest rate.
If a person has more than one loan, he can merge the loans into one fixed-rate loan.
In direct Loan Consolidation, there is no minimum number of loans or balances to qualify. Borrowers can consolidate even a single small balance loan.
He can also have more than one consolidated loan. One may choose not to include his previously consolidated loan in his new loan consolidation if he has consolidated before.
To keep the cost of borrowing low when repayment starts, borrowers can go for the same standard 10-year maximum repayment term as they have with their current Direct Loan
Note: Direct loan consolidation is no longer an option in-school; consolidation is only an option after the student graduates.
There is no cost to consolidate, hence, parents can consolidate their Federal Direct PLUS Loans.
In as little as 8 minutes, students can apply for Direct Loan consolidation through the Internet.
When a student signs up for an Electronic Debit Account, he can receive a 1/4 percentage point interest rate reduction.
CALCULATION OF DIRECT LOAN CONSOLIDATION INTEREST RATES
It is noted that the interest rate of a consolidation loan is the weighted average interest rate on all the loans one is consolidating. One may use the online calculator on the Federal Loan Consolidation website to see whether consolidation will save him money.
The interest rate structure on Federal Direct Stafford Loans and PLUS Loans from a variable interest rate to a fixed interest rate for loans received on or after July 1, 2006 has been changed by the Federal legislation. The following are the fixed interest rates for these loans:
6.0% Subsidized Federal Direct Stafford Loans for undergraduates (after July 1, 2008)
6.8% Unsubsidized Federal Direct Stafford Loans and Subsidized Federal Direct Staff Loans for graduates
7.9% Federal Direct PLUS Loans
The interest rate will remain variable on any loans received prior to July 1, 2006 and will change July 1 each year.
CONSOLIDATING OTHER FEDERAL LOANS:
A person borrowing loans such as Perkins, Health Professions, or Nursing Loans can also do a direct loan consolidation. However, one should be aware that when he consolidates, he will lose the cancellation provisions of these loans.
This could be disadvantageous for certain students, including those who plan to serve in the Armed Services, Peace Corps, among others. For information about Health Professions Loan and Nursing Loan cancellation information, one may see his promissory note.
APPLYING FOR CONSOLIDATION:
The student will be assisted by the Direct Loan Servicer with the loan consolidation process:
Applying online through the Direct Loan Servicer using one’s U.S. Department of Education Personal Identification Number (PIN), is the easiest way to apply for consolidation. Information about consolidation and paper applications can be obtained from the Internet at www.loanconsolidation.ed.gov or by calling 1-800-557-7392.
Name, address, and telephone number for two references with different U.S. addresses are essential, including the lender name, address, and current balance information for each of the education loans that one wishes to consolidate. Much of this information will be already be pre-filled in for the student, if he applies online the Direct Loan Servicer using his PIN,. It is also noted that the View Student Loan Summary page of Wolverine Access also lists this information (select Student Business > login > Financial Aid > Aid Year > Loans > View Student Loan Summary).
He may also refer to his monthly Direct Loan statements, his Direct Loan Servicer account information (www.dl.ed.gov), or his promissory notes, thus Direct Loan Borrower Services can also help (telephone: 1-800-848-0979).
The student will need to list for each of his loans: the loan holder, loan servicer’s name, address, and telephone number, when filling up the Education Loan Indebtedness section of the application.
One should list the Direct Loan Servicer contact information available on his most recent Direct Loan Statement,
For Federal Direct Loans, including Subsidized, Unsubsidized and PLUS, the student had while at University of Michigan, he must list the Direct Loan Servicer contact information available on his most recent Direct Loan Statement.
It is advisable for one to learn how to consolidate private loans, he may contact his private loan lender directly.
NOTE: Private educational loans cannot be included in a federal loan consolidation.