Special Direct Consolidation Loans | 02.10.12

Posted in Consolidation, Loan Consolidation, Repayment, Student Loans By Student Loan Network Staff

Merging money street signIn a recent State of the Union Address, President Obama mentioned a Special Direct Consolidation Loan available to some borrowers with federal loans. This loan is not your typical Direct Consolidation Loan, and is only available for a brief period this year. This is a great opportunity for borrowers with the old, FFEL loans, as it will make managing repayment a much simpler task. Let’s take a look at how this loan works.

Background

First, let’s understand a little bit about historical student loans. Before Direct Loans came into play, the Federal Family Education Loan (FFEL) Program included four types of loans: Stafford, Unsubsidized Stafford, PLUS, and Consolidation. These loans, while still federally guaranteed loans, were made by private lenders and serviced privately. Now under the Direct Loan Program, federal loans are funded directly through the government (though there are four companies who service the loan on behalf of the Dept. of Education).

How Special Consolidation Loans Work

For borrowers who hold loans under both the FFEL and Direct Loan Programs, repayment can be difficult because FFEL loans are held by one or more lenders, while Direct loans are held by another. This Special Direct Consolidation opportunity will allow borrowers who have both types to consolidate their FFEL loans into a Direct loan, allowing all loans to be serviced by the same company.

Benefits

Eligibility

Borrowers must have both an FFEL and a Direct Loan in order to take advantage of this opportunity, however, only the FFEL loans are eligbile. Additionally, the loans must be in good standing (not in default or bankruptcy) and in either grace, repayment, deferment, or forbearance.

How to Get Started

Borrowers who are eligible to consolidate under this loan will be contacted by their current Direct Loan Servicer with instructions. Notifications of eligibility began January 17, 2012. This option will only be available until June 30, 2012, so make sure to take action as soon as you hear from your servicer if you plan to participate.


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16 Responses to “Special Direct Consolidation Loans”

  1. Molly Cason says on July 29, 2012 at 9:45 am:

    I have applied for Special Direct Loan Consolidation. I have already made several qualifying payments toward Public Service Loan Forgiveness through Direct Loans. Will those payments still count towards my 120 payments after this new consolidation goes through?

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  2. Tanika says on April 29, 2012 at 11:10 pm:

    What are the disadvatages of the Special Direct Loan Consolidation Program?

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  3. Nell says on April 26, 2012 at 9:58 pm:

    I’m about to graduate from grad school with a huge amount of debt (think upwards of 150k) spread out over ten loans. I’ve got one FFEL loan, multiple stafford loans (subsidized and unsubsidized), and a few direct plus graduate loans. All the loans are held by Great Lakes, with the exception of one stafford that’s held by Sallie Mae. Do I qualify for the Special Direct Consolidation?

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    • Student Loan Guru says on May 1, 2012 at 4:26 pm:

      If you qualify, you should have been contacted by your servicer. I would suggest contacting Great Lakes for more information.

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  4. erica shepard says on April 15, 2012 at 11:52 pm:

    I qualified for the special direct loan but im confused… I still owe DOE the same amount and I still owe Sallie Mae the same amount but now I have another amount in my sallie mae thats a new loan anyone know why???

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  5. Tom says on April 2, 2012 at 10:03 pm:

    If I am not able to consolidate all my gov loans under the Special Consolidation does that mean that only my private loans will be consolidated? Can you consolidate your other loans that do not qualify for the Special Consolidation program under the Traditional consolidation program?

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    • Student Loan Guru says on April 4, 2012 at 11:23 am:

      If you don’t qualify for the special consolidation loan, you can still consolidate federal loans into a regular Direct Consolidation Loan (assuming you meet the requirements). Private loans must be consolidated separately either way. To start the process for a Direct or Private consolidation loan, try StudentLoanConsolidator.com.

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  6. John says on March 24, 2012 at 5:10 pm:

    If I was not able to finish college due to the cost being to expensive, can I still consolidate the student loans that I have. They are private student loans. I have about $80,000. in private loans and about 12,000. in federal loans.

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  7. Sharon Watkis says on February 27, 2012 at 2:28 pm:

    I would like to consolidate all the loans that I have into one and start paying them as soon as April 2012. I have several government loans and some private loans. I am not paying on my loan right now because I had an accident and could not work for a year. i will like to make arrangements to start paying now.

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  8. Denessa Brown says on February 26, 2012 at 5:51 pm:

    I am not attending school this semester, and will probably start paying my student loan in June 2012, I would like to consolidate my Stafford and unsubsidized loans, As of this date I haven’t been contacted about my loans, except to complete the exit. Should I contact Sallie Mae!

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  9. Barbara Tinker says on February 26, 2012 at 10:52 am:

    Does a new borrower get low and fixed interest rate?

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  10. Susan Fraser says on February 25, 2012 at 7:01 pm:

    I would like to learn more about the loan consolidation program. Do I need to contact anyone or will the someone contact me about it?

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    • Student Loan Guru says on March 1, 2012 at 9:15 am:

      If you are eligible, you will be contacted by your loan servicer. If you simply want to know more, you can call the Department of Education at 800-433-3243.

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