|
CHAPTER SEVEN
FEDERAL AND OTHER CONSOLIDATION LOAN PROGRAMS
Loan consolidation enables a borrower with loans from different
lenders to obtain one loan‚ with one interest rate
and repayment schedule.
Once a borrower leaves school‚ he or she may consider
consolidation as an option to make repayment easier. The
student must contact his or her lender(s) for Federal FFEL
Consolidation or the Loan Origination Center for Direct
Loan to request these options and any agreement to refinance
or consolidate loans is between the borrower and the lender
or the Department‚ respectively. A student should keep
in mind that loan consolidation does not increase Federal
Stafford Loan limits; aggregate loan limits must include
any portion of a borrower’s Consolidation Loan used
to repay a Stafford Loan. Eligibility requirements‚
interest rates‚ and the administration of Consolidation
Loans are different from Direct Loan and FFEL programs.
This chapter is split into two parts – Federal (FFEL)
Consolidation Loans and Direct Consolidation Loans to better
explain each program’s requirements.
FEDERAL (FFEL) CONSOLIDATION LOANS
A Federal Consolidation Loan enables a borrower with several
loans to obtain one loan with one interest rate and repayment
schedule. Stafford Loans (both subsidized and unsubsidized)‚
Federal Insured Student Loans (FISL’s)‚ Federal
Perkins Loans‚ National Direct Student Loans (NDSLs)‚
PLUS Loans to students‚ Auxiliary Loans to Assist Students
(ALAS)‚ parent PLUS Loans‚ SLS loans‚ Health
Professions Student Loans‚ and Nursing Student Loan
Program loans may be consolidated only by lenders that have
an agreement with the Department or a guaranty agency for
that purpose. (PLUS Loans to students and ALAS are former
names of the SLS Program.) These also include certain existing
Consolidated loans and Direct Loans‚ if the application
for the Consolidation Loan was received on or after November
13‚ 1997.
Nonfederal loans made by state or private lenders are not
eligible for consolidation.
A defaulted loan may be included in a consolidation loan
if the borrower has made satisfactory repayment arrangements
with the holder to repay the loan. Three voluntary‚
on–time‚ consecutive monthly payments under a
"satisfactory repayment arrangement" are required to consolidate
a defaulted loan. A borrower can also consolidate a defaulted
loan without having to make three required payments‚
if he or she agrees to repay the Consolidation Loan under
an income–sensitive repayment plan.
Loan consolidation allows a lender to pay off the existing
loans and make one Federal Consolidation Loan to replace
them. Consolidation may include‚ in addition to unpaid
principal and interest on the underlying loans being consolidated‚
late charges and collection costs applied to those loans.
A guaranty agency (or the Department‚ if it is holding
the loan) may assess the borrower collection charges or
late fees up to 18.5 percent of the principal and interest
that is outstanding at the time of loan payoff certification
on the defaulted Stafford Loan that is to be included in
a Federal Consolidation Loan.
A lender must offer standard‚ graduated‚ and
income–sensitive repayment options on Federal Consolidation
Loans.
APPLYING FOR A FEDERAL CONSOLIDATION LOAN
Generally‚ a borrower submits a Consolidation Loan
application to a lender holding at least one of the loans
to be consolidated. If none of those lenders agrees to consolidation‚
the borrower may apply to any other lender participating
in the Consolidation Loan Program. A borrower whose loans
are all held by one lender must consolidate with that lender
unless the borrower certifies that he or she has sought
and been unable to secure a Federal Consolidation Loan with
acceptable income–sensitive repayment terms.
The Higher Education Amendments of 1998 specify that lenders
are not required to provide for consolidation of loans made
under Titles VII and VIII of the Public Health Service Act.
The borrower must give the lender all relevant information
concerning his or her existing loans.
A borrower may add to an existing Consolidation Loan eligible
loans received before the date of consolidation‚ if
the loans are added within 180 days after the date the Consolidation
Loan is made.
BORROWER ELIGIBILITY FOR A FEDERAL CONSOLIDATION LOAN
To be eligible for a Federal Consolidation Loan‚ a
borrower
However‚ the Higher Education Amendments of 1998 eliminated
defaulted borrowers against whom a court has issued judgment
or against whom a wage garnishment order has been issued from
Federal Consolidation Loan eligibility.
-
must not have another Consolidation Loan application
pending;
-
must agree to notify the loan holder of any address
changes; and
-
must certify that the lender holds at least one of the
borrower’s outstanding loans that are being consolidated
or that the borrower has unsuccessfully sought a Consolidation
Loan from the holders of the outstanding loans and was
unable to secure one.
There is no longer a minimum debt level a borrower must have
to qualify for consolidation.
The Higher Education Amendments of 1998 clarify treatment
of loans made before and after loan consolidation.
-
An individual may receive a subsequent consolidation
loan to consolidate eligible loans received after the
borrower’s first consolidation is made;
-
An individual may add loans made prior to the date of
the Consolidation Loan within 180 days following making
the Consolidation Loan;
-
An individual may add loans received following the making
of the Consolidation Loan within 180 days after making
the Consolidation Loan;
-
An individual may add loans made prior to the date of
a first Consolidation Loan to a subsequent Consolidation
Loan.
A married couple may consolidate individual loans if both
spouses agree to be held jointly and separately liable for
repayment of the Consolidation Loan regardless of the amount
of their individual debts and regardless of any future change
in marital status. If one spouse dies‚ becomes totally
and permanently disabled‚ has collection of his or her
loan obligation stayed by a bankruptcy filing‚ or has
that obligation discharged in bankruptcy‚ the other borrower
remains obligated to repay the loan.
Both spouses must meet the eligibility requirements to qualify
for a Consolidation Loan. Only one spouse is required to certify
that the lender holds at least one of his or her outstanding
loans that are being consolidated or that he or she has unsuccessfully
sought a Consolidation Loan from the holders of the outstanding
loans and was unable to secure one.
Joint consolidators are held jointly and separately liable
for the Consolidation Loan. To receive a deferment‚ forbearance‚
or discharge‚ both borrowers must meet the qualifying
conditions‚ unless a discharge is due to school closure
or false certification. In that case‚ only one borrower
must qualify; however‚ only the portion of the Consolidation
Loan affected by the school closure of false certification
can be discharged‚ unless the borrower’s spouse
qualifies for some type of discharge.
If a borrower is unable to obtain a Consolidation Loan from
a lender eligible to make such loans‚ the borrower may
apply through the U.S. Department of Education for a Federal
Direct Consolidation Loan under the Direct Loan Program. The
borrower must certify that he or she has been unable to obtain
from an eligible lender a Consolidation Loan or a Consolidation
Loan with income–sensitive repayment terms acceptable
to the borrower. The eligibility criteria for Federal Direct
Consolidation Loans differ from the criteria for Federal Consolidation
Loans.
INTEREST RATES
The interest rate for a Federal Consolidation Loan made from
July 1‚ 1994 to November 13‚ 1997 is the greater
of the weighted average of the interest rates of the loans
consolidated (rounded to the nearest whole percent) or 9 percent.
When determining the weighted average of interest rates‚
the interest rate used for each loan is that which is in effect
for it at the time the loan is paid in full through consolidation.
The interest rate for a Federal Consolidation Loan made from
November 14‚ 1997 to September 30‚ 1998 is the bond
equivalent rate of 91–day Treasury bills sold at the
final auction before June 1‚ plus 3.10 percent. The interest
rate may not exceed 8.25 percent.
The interest rate for a Federal Consolidation Loan made from
November 14‚ 1997 to September 30‚ 1998 is the bond
equivalent rate of 91–day Treasury bills sold at the
final auction before June 1‚ plus 3.10 percent. The interest
rate may not exceed 8.25 percent.
If a Federal Consolidation Loan application was received
on or after October 1‚ 1998‚ the interest rate is
the weighted average of the interest rates of the loans being
consolidated‚ rounded to the nearest higher one–eighth
of 1 percent‚ not to exceed 8.25 percent.
There are no insurance premiums of other fees for loan consolidation.
A borrower interested in consolidation should understand
that consolidating Perkins loans (or NDSLs) will result in
-
a higher interest rate than he or she is paying on those
loans;
-
fewer deferment provisions than he or she has available
under the Perkins Loan (or NDSL) Program; and
-
the loss of Perkins Loan (or NDSL) cancellation provisions
on the loans being consolidated
The student should understand that consolidation Stafford
Loans and SLS loans may result in higher interest rates than
he or she was paying on those loans. However‚ because
Consolidation Loans may have repayment periods as long as
30 years‚ the borrower’s monthly repayment amount
may be reduced.
For loan applications received on or after August 10‚
1993‚ the borrower is entitled to an interest subsidy
during deferment only when the Consolidation Loan is made
up exclusively of subsidized Stafford Loans.
REPAYMENT
Generally‚ the first payment on a Federal Consolidation
Loan is due within 60 days after consolidation. (The repayment
period begins on the day the Consolidation Loan is disbursed.)
There are a number of repayment options‚ including the
graduated repayment and income–sensitive repayment options
mentioned previously. The repayment period varies from 10
to 30 years‚ depending on the amount consolidated and
on other student loans the borrower may have. If the amount
to be consolidated is less than $7‚500‚ for example‚
the repayment period must not exceed 10 years.
All deferment and forbearance are options available to FFEL
Stafford Loan borrowers. If a married couple is jointly liable
for repayment of a Federal Consolidation Loan‚ the lender
may grant forbearance only if both persons meet the conditions
for forbearance.
The following are consolidation agencies that UMDNJ graduates
currently use:
United State Department of Education
Consolidation Department
P. O. Box 1723
Montgomery‚ AL 36102–1723
1–800–557–7392
Pennsylvania Higher Education Assistance Authority
Network Consolidation Program
1200 North 7th Street Harrisburg‚ PA 17102–1444
1–800–338–5000
Educaid
P. O. Box 196
New Brunswick‚ NJ 08903
1–800–283–6221 (AFSA) or
1–800–388–5000 (SLSC)
Crestar Bank
Student Lending Department
P. O. Box 27172
Richmond‚ VA 23261–7172
1–800–552–3006
USA Group
MCH 637
Loan Consolidation
P. O. Box 6179
Indianapolis‚ IN 46206
1–800–448–3533
SALLIE MAE
Smart Loan Origination – Telemarketing Department
P. O. Box 5400
Wilkes–Barre‚ PA 18773
1–800–524–9100
NOTE: WE HAVE ALSO INCLUDED CONSOLIDATION WEBSITES FOR YOUR
INFORMATION.
Consolidation
Loan Web Sites
DIRECT CONSOLIDATION LOANS
Direct Consolidation Loans allow William D. Ford Federal
Direct Loan (Direct Loan) and Federal Family Education Loan
(FFEL) borrowers to combine one or more federal education
loans and create one Direct Loan with one monthly payment.
Borrowers can extend their repayment periods‚ thereby
reducing monthly payments and possibly lowering the interest
rate.
Subsidized Student Financial Assistance loans can be consolidated
into a Direct Subsidized Consolidation Loan. Unsubsidized
Student Financial Assistance loans‚ as well as certain
loans authorized under Titles VII and VIII of the Public Health
Service Act (administered by the U.S. Department of Health
and Human Services)‚ can be consolidated into a Direct
Unsubsidized Consolidation Loan. Direct PLUS Loans and Federal
PLUS Loans can be combined into one Direct PLUS Consolidation
Loan.
Even if borrowers have more than one loan type of loan‚
they receive only one Direct Consolidation Loan and make just
one monthly payment. However‚ the U.S. Department of
Education (the Department) will track the parts of the Direct
Consolidation Loan separately because the type of loan affects
interest rates‚ interest subsidies‚ and deferment
on the subsidized portion of a Direct Consolidation Loan.
Borrowers must consolidate at least one Direct Loan or FFEL
but generally are not required to consolidate all their outstanding
federal education loans. For example‚ a borrower may
choose not to consolidate a loan with an interest rate lower
than a Direct Consolidation Loan’s interest rate. A borrower
may not‚ however‚ exclude Student Financial Assistance
loan in default unless he or she has met the requirements
for regaining eligibility.
Nonfederal loans made by state private lenders are not eligible
for consolidation.
LOAN LIMITS
There are no minimum or maximum loan limits that apply to
Direct Consolidation Loans. A Direct Consolidation Loan’s
principal balance equals the sum of the amounts the Department
pays to the holders of the loans being consolidated. The Department
pays each holder the amount necessary to pay in full the loan
being consolidated.
Consolidation does not increase a borrower’s aggregate
loan limits. The aggregate limit for undergraduate and graduate/professional
students must include any portion of a Direct Consolidation
Loan used to repay a Direct Subsidized or Unsubsidized Loan‚
a subsidized or unsubsidized Federal Stafford Loan‚ or
a Federal Supplemental Loans for Students (SLS) Loan.
INTEREST RATES
Direct Consolidation Loan interest rates are variable and
are determined on June 1 each year. The rates are actually
adjusted annually on July 1 and apply to the following 12
month period from July 1 to June 30.
The higher education amendments of 1998 also established
an interest rate formula for all direct consolidation loans
for applications received from February 1‚ 1999 through
June 30‚ 2002. The interest rate for these loans is fixed
for the life of the loan at the lesser of the weighted average
of the interest rates of the loans being consolidated‚
rounded to the nearest higher one–eighth off one percent
or 8.25 percent.
During in–school‚ grace‚ and deferment periods‚
the department does not charge borrowers interest on direct
subsidized consolidation loans. Interest is charged during
forbearance‚ however‚ interest is charged on direct
unsubsidized consolidation loans and direct plus consolidation
loans during all periods.
Borrowers may pay the interest for which they are responsible
during applicable period or postpone paying it and have the
interest capitalized (added to the principal owed).
ADDITIONAL BORROWING COSTS
Borrowers are not charged a loan fee for consolidation of
their loans.
Borrowers are not charged late fees on all or part of any
payments the borrower does not pay within 30 days of the due
date. The late charge may not exceed six cents for each dollar
of each late installment. Currently‚ however‚ the
department is not charging late fees.
On a Direct Consolidation Loan not in default‚ the Department
may require the borrower of endorser to pay any costs‚
in excess of routine collection costs‚ incurred in collecting
installments not paid when due. Such charges do not include
the routine costs of preparing letters or notices or making
local or long–distance telephone calls. An example of
non–routine collection cost is the cost of processing
checks returned for insufficient funds. On a Direct Consolidation
Loan in default‚ the Department may require the borrower
or any endorser to pay additional costs.
ELIGIBILITY
Borrowers must send a Direct Consolidation Loan application
to the Department’s Loan Origination Center. A single
consolidation application is used‚ even if the borrower
is consolidating more than one type of loan‚ such as
subsidized student loans and unsubsidized student loans or
subsidized student loans and PLUS Loans (if the borrower has
a loan for a dependent student as well as a loan for him or
herself). The publication Direct Consolidation Loans: A Guide
explains the application process in detail.
Borrowers may add preexisting eligible loans to a newly created
Direct Consolidation Loan without submitting a new application;
borrowers simply submit a request to the Department within
180 days after the loan is originated.
There are two types of consolidation‚ "regular" and
"in–school." Basically‚ however‚ borrowers
may consolidate loans any time after they are fully disbursed.
Consolidation eligibility criteria vary somewhat depending
on when borrowers consolidate and whether they are in default.
All Direct Consolidation Loan borrowers‚ however‚
receive the same deferment‚ forbearance‚ and discharge
provisions available to borrowers of other Direct Loans. Note
that a borrower who consolidates a loan that is in deferment
must reapply for the deferment once the loan is consolidated.
Borrowers who were enrolled or accepted for enrollment were
prohibited from consolidating their loans under the Direct
Loan Program if they had FFELs and/or Perkins Loans and their
application were received from October 1‚ 1998 through
January 31‚ 1999.
Regular Consolidation
-
A borrower can consolidate when his or her loans are
no longer in an in– school period‚ such as during
the borrower’s grace period‚ when a loan is
in repayment‚ or even when a loan is in default (in
certain circumstances described below). A borrower consolidating
at least one fully disbursed Direct Loan or FFEL‚
none of which is in an in–school period‚ may
consolidate under the regular Direct Loan Consolidation
Loan process. A borrower may also include other student
loans‚ such as Federal Perkins Loans and eligible
health professions student loans.
-
A borrower with an outstanding FFEL but no outstanding
Direct Loans must meet one of two conditions to receive
a regular Direct Consolidation Loan: the borrower must
be unable to obtain a Federal Consolidation Loan after
checking with a lender that makes such loans; or‚
if the borrower is eligible for the Income Contingent
Repayment Plan‚ he or she must be unable to obtain
a Federal Consolidation Loan with acceptable income–sensitive
repayment terms after checking with a lender that makes
Federal Consolidation Loans.
-
For married borrowers who want to consolidate jointly‚
only one borrower must meet the conditions described in
the preceding paragraph. Joint consolidators are held
jointly and separately liable for their consolidation
loan‚ however‚ both borrowers must quality for
deferment‚ forbearance‚ and discharge‚
unless a discharge is due to school closure or false certification.
In those two cases‚ only one borrower has to qualify;
however‚ only the portion of the direct consolidation
loan affected by the school closure or false certification
can be discharged.
-
Regular consolidation requires that borrowers (both
borrowers‚ if married and consolidation jointly)
have no federal consolidation loan applications pending
with any other lenders (for example‚ an FFEL Program
lender). Also‚ borrowers must agree to notify the
Department of any address change.
-
A regular consolidation loan’s repayment period
begins the day the first disbursement is made; the first
payment is due within 60 days of the date‚ unless
the borrower is in deferment on the consolidation loan.
There is no grace period.
-
Borrowers in repayment on any loans to be consolidated
should continue making payments to their current loan
holders until receiving written notice from the Department
that it has consolidated their loans. Once the loans are
consolidated‚ any payments a borrower makes to the
original holders will be sent to the Department to reduce
the Direct Consolidation Loan balance.
In–School Consolidation
-
An in–school period is defined as the period before
a loan enters the grace period while a borrower is enrolled
at least half time at an eligible school. A loan is considered
to be in an in–school period if the borrower entered
but never completed the grace period because the borrower
reenrolled at least half time at an eligible school before
the grace period expired.
-
In–school consolidation requires borrowers to meet
the requirements for regular consolidation‚ with
some exceptions. Unlike regular consolidation‚ borrowers
eligible for in–school consolidation may consolidate
only Direct Loans or FFELs; the other types of federal
education loans listed at the beginning of this chapter
may be consolidated only after borrowers leave school.
-
Borrowers attending Direct Loan schools must consolidate
at least one fully disbursed Direct Loan or FFEL that
is in an in–school period. Borrowers attending non–Direct
Loan schools must have a Direct Loan and must consolidate
a Direct Loan of FFEL that is in an in–school period.
(note that borrowers can qualify simply by consolidating
one Direct Loan that is in an in–school period.)
Married borrowers who wish to consolidate jointly must–have
Direct Loans or FFELs in in–school periods. If a
married borrower attends a Direct Loan school but the
spouse attends a non–Direct Loan school the spouse
must have a Direct Loan and must consolidate a FFEL or
Direct Loan in an in–school period. (The spouse can
qualify simply by consolidating one Direct Loan that is
in an in–school period.)
-
Borrowers with no Direct Loans who want to consolidate
FFELs must be attending Direct Loan schools. (At least
one FFEL must be in an in–school period.) Such borrowers
do not have to certify that they have been unable to obtain
Federal Consolidation Loans–FFEL borrowers currently
are not permitted under the Federal Consolidation Loan
Program to consolidate a loan in an in–school period.
-
The borrower of an in–school Direct Consolidation
Loan receives a six–month grace period on the loan
when he or she reduces enrollment to less than half time
at an eligible school. If the underlying loan(s) that
is in an in–school period enters the grace period
after the Direct Consolidation Loan application’s
submission but before the consolidation loan’s first
disbursement‚ borrowers do not have to make payments
on the loan for the amount of time remaining in the grace
period at the time of the first disbursement.
CONSOLIDATION OF DEFAULTED LOANS
Generally‚ defaulted student loans may be consolidated
if borrowers agree either to repay the Direct Consolidation
Loan under the Income Contingent Repayment Plan or make satisfactory
repayment arrangements with the current loan holder. However‚
the borrower has only one option–to make satisfactory
repayment arrangements with the current loan holder–in
the following two situations:
For purpose of consolidating a defaulted Direct Loan‚
FFEL‚ or Perkins Loan‚ satisfactory repayment arrangements
are defined as three consecutive‚ voluntary‚ on–time‚
full monthly payments that are reasonable and affordable given
the borrower’s total financial situation. Borrowers eligible
to consolidate defaulted health professions loans must contact
the loan holders to determine how a satisfactory repayment
arrangement is defined.
Borrowers may not exclude a defaulted Student Financial Assistance
Loan from consolidation unless they have made repayment arrangements
satisfactory to regain Student Financial Assistance eligibility.
For Direct Loans and FFELs‚ these arrangements are the
same as those described above‚ except borrowers must
make six payments instead of three. For Perkins Loans‚
borrowers must repay the loan in full or sign a new repayment
agreement and make one payment each month for six consecutive
months. Note that regaining Student Financial Assistance eligibility
does not apply if only health professions loans are in default.
For defaulted Direct Loans and FFELs‚ collection costs
up to a maximum of 18.5 percent may be added to the outstanding
principal loan balance. For defaulted Perkins Loans and health
professions loans‚ collection costs equal to the amount
the borrower owes may be added to the outstanding principal
loan balance.
In general‚ a borrower may not consolidate any loan
on which a judgment has been obtained. For example‚ a
borrower with a judgment on a defaulted Direct Loan‚
FFEL‚ or Perkins Loan who makes satisfactory repayment
arrangements on the judgement for purposes of regaining Student
Financial Assistance eligibility may still not include the
judgment in a Direct Consolidation Loan. A borrower with a
judgment on a health professions loan who is not in default
on any Student Financial Assistance loan may consolidate all
loans except the judgment.
Note that borrowers who have judgments on Direct Loans or
FFELs but who rehabilitate those loans may include them in
a Direct consolidation Loan.
SUBSEQUENT CONSOLIDATION
-
A borrower may add preexisting eligible loans to a Direct
Consolidation Loan within 180 days after the date the
Direct Consolidation Loan is made. Preexisting eligible
loan is one fully disbursed before the Direct Consolidation
Loan’s first disbursement is made. A borrower who
listed the preexisting loan as an outstanding debt on
the consolidation application may telephone the Loan Origination
Center to request that the loan be added. A borrower who
did not list the loan must submit a brief written request
that includes the loan information the consolidation application
requires.
-
After the Department verifies the additional loan‚
the borrower must sign a promissory note for the additional
amount before the Department will pay off the holder.
The loan disclosure issued when the subsequent consolidation
is completed will include the balance of the newly consolidated
loan.
-
If the original Direct Consolidation Loan required an
endorser on the PLUS portion of the loan and the borrower
is adding a PLUS Loan. If an endorser was not originally
required for the added PLUS Loan‚ the endorser must
agree to repay the entire direct PLUS Consolidation Loan.
-
A borrower who wants to consolidate additional eligible
loans after 180 days must complete a new Direct Consolidation
Loan application.
REPAYMENT
-
A regular Direct Consolidation Loan’s repayment
period begins the day the loan is first disbursed. If
a Direct Consolidation Loan includes at least one Direct
Loan or FFEL that is in an in–school period at the
time the Department receives the consoli–dation application‚
the repayment period begins the day after the grace period
ends.
-
The first payment on a Direct Consolidation Loan is
due within 60 days of the loan’s first disbursement‚
unless a borrower is eligible for a deferment or the loan
includes at least one Direct Loan FFEL in an in–school
period and therefore qualifies for a grace period.
-
Direct Loan repayment plans and their requirements also
apply to Direct Consolidation Loans. The length of a Direct
Consolidation Loan repayment period under each plan is
the same as for nonconsolidated Direct Loans.
-
Borrowers may not choose the Income Contingent Repayment
Plan for Direct PLUS Consolidation Loans. Borrowers with
these loans may have two repayment plans if they want
to repay their Direct Subsidized Consolidation Loans and/or
Direct Unsubsidized Consolidation Loans under the Income
Contingent Repayment Plan.
-
For Direct Consolidation Loans‚ outstanding balances
consist of all the borrowers Direct Consolidation Loans‚
Direct Loans‚ and other education loans not made
by an individual and not in default (unless satisfactory
repayment arrangements have been made). The total outstanding
balance for the other education loans used to determine
an Extended or Graduated repayment period may not exceed
the amount of the Direct Consolidation Loan.
-
The Department forwards a repayment schedule to the
Direct Consolidation Loan borrower before the first installment
payment is due. The schedule presents the borrower’s
monthly repayment under the repayment plan selected. If
a borrower then adds an eligible loan to the consolidation‚
the Department adjusts the monthly repayment amount (and‚
if necessary‚ the repayment period for loans in Graduated
or Extended repayment plans).
-
As is true for Direct Loans‚ a borrower who decides
the repayment plan selected for the Direct Consolidation
Loan no longer meets his or her needs can switch plans
by calling or writing the Direct Loan Servicing Center–as
long as the new plan’s maximum repayment period is
longer than the period the borrower’s loan has already
been in repayment.
-
A borrower who had a defaulted loan and became eligible
for a Direct Consolidation Loan by agreeing to repay it
under the Income Contingent Repayment (ICR) Plan may switch
to a plan other than ICR if he or she
-
was required to make‚ and did make‚ a
payment under ICR in each of the prior three months;
or
-
was not required to make payments but made three
reasonable and affordable payments in each of the
prior three months.
In either case‚ a borrower must call or write the Direct
Loan Servicing Center to receive permission to make a switch.
|
