Borrowers Currently Enrolled In School Can No Longer Consolidate Their Loans

"In this type of loan, the applicant will provide collateral that covers more than 50 percent of the value of the loan, or as much as the total loan."

Borrowers Currently Enrolled In School Can No Longer Consolidate Their Loans

Borrowers Currently Enrolled in school can no longer Consolidate Their Loans


The Higher Education Reconciliation Act of 2005 eliminated the provision that allowed a FFEL or Direct Loan borrower who is enrolled in school on at least a half-time basis to request to enter repayment early on his or her Stafford Loans if the lender approves. Repayment is now defined as not beginning until 6 months and one day after the date the student ceases to carry at least one-half the normal full- time academic workload, as determined by the school. Therefore, a FFEL or Direct Loan borrower who is still enrolled in school at least half-time may no longer request to enter repayment early to apply for a FFEL or Direct Consolidation Loan.

To apply for a Direct Loan Consolidation or an FFEL Consolidation the borrower must contact the lender and complete an application. Most lenders provide borrowers with the ability to apply on-line or request an application over the telephone. Once an application is completed and submitted, the lender will request information from the borrowers other lenders or from its own system to determine the amounts outstanding on the borrowers loans. The borrower will then receive notification about the consolidation loan, normal consumer disclosures, the amount owed, and if appropriate, where to make payments.

FFEL Consolidation Loan Weighted Average Interest Rate

Consolidation loans have fixed interest rates that are based on the weighted average of the interest rates on the loans being consolidated. A lender can provide a new consolidation loan borrower with the lowest statutory weighted average interest rate for loans by using the lower of the weighted average of the interest rates on the loans being consolidated as of July 1 or the date the lender received the borrower's consolidation loan application. The lender should apply a consistent method of determining when an application is received.

Most federal education loans are eligible for consolidation, including subsidized and unsubsidized Direct and FFEL Stafford Loans, SLS, Federal Perkins Loans, Federal Nursing Loans, and Health Education Assistance Loans. Private education loans are not eligible. PLUS Loan borrowers (parent borrowers) also can consolidate their loans.

To obtain a complete list of the federal student loans that can be consolidated

* contact the Direct Loan Origination Center's Consolidation Department if youre applying for a Direct Consolidation Loan. You can reach them by calling 1-800-557-7392. TTY users may call 1-800-557-7395.
* contact a participating FFEL lender if youre applying for a FFEL Consolidation Loan. If you do not know who your FFEL lender is, please call 1-800-433-3243 for assistance.

In case you may be able to use both type of loans, the main question is, with which type of consolidation loan you are going to pay less money?

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    "Lastly, as the life of a student is a busy one, it may be difficult to keep a constant eye on your finances but a result of taking on a direct loan; you can make all necessary payments online and check up on the accounts directly from your computer."

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    "The typical people has some kind of debt to his name, and most encounter overwhelming debts at one time or other in their lives."

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Once you have a figure, you can decide what would be the amount you want to consolidate.

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