Consolidation direct loan program

A borrower who submits a Direct Consolidation Loan application by October 31, , is still eligible so long as the application results in a Direct Consolidation Loan being made even if it is made after October 31, ; and. For borrowers who consolidate their loans or submit a consolidation loan application by October 31, , the Department will provide credit toward PSLF for any month the borrower was in qualifying employment and was in repayment on the loans they consolidated, even if not all their loans were in repayment during a given month.

For example, if a borrower was in repayment on a FFEL Subsidized Stafford Loan from January through December but was in repayment on a Federal Perkins Loan from February through December , the borrower would receive credit on the Direct Consolidation Loan for the entire period of February through December As usual, for a payment to fully qualify for PSLF, an approved employment certification must be on file for each month under consideration.

Parent PLUS Loans are not eligible for this credit directly; however, if a borrower has a mix of Parent PLUS Loans and loans they received as a student, the period the borrower was in repayment on the loans they received as a student will be considered as months of qualifying payments on the Direct Consolidation Loan. As always, the Department expects FFEL and Perkins Loan program participants to provide complete, timely, and accurate information about the terms and benefits of Title IV loans, as well as provide the steps a borrower needs to take to access those benefits.

The Department additionally expects FFEL and Perkins Loan program participants to assist borrowers with assessing whether they are meeting specific program requirements, or what actions borrowers need to take to ensure they receive the maximum benefit to which they are entitled under the Title IV programs. The Department will be working with its enforcement partners on a joint approach to evaluating whether FFEL and Perkins Loan program participants are meeting such obligations.

Interactions with borrowers must not be unfair, deceptive, abusive, or misleading. The Department has provided copies of this Dear Colleague Letter to the Consumer Financial Protection Bureau, state Attorneys General, and state banking regulators to ensure they are familiar with this guidance about implementation of the limited PSLF waiver and are able to assist the Department in ensuring compliance with applicable laws.

We will pair these changes with an expanded communications campaign to make sure affected borrowers learn about these opportunities and encourage them to apply. These changes are important steps toward a better and stronger PSLF program, one that will move away from the current situation in which too few borrowers receive forgiveness, and too many do not receive credit for years of payments they made because of complicated eligibility rules, servicing errors or other technicalities.

The Department is also working to identify further improvements to ensure public servants get the relief they deserve, including partnerships with employers and revising regulations. These actions are informed by the more than 48, comments the Department received on a request for information on improving PSLF issued over the summer.

The Department estimates that the limited waiver alone will help over , borrowers who had previously consolidated their loans see their progress toward PSLF grow automatically, with the average borrower receiving 23 additional payments. For reference, just over 16, borrowers have ever received forgiveness under PSLF prior to this action. We anticipate that many more will also receive additional credit as we implement other changes over time, such as counting previously ineligible payments that were not affected by a loan consolidation.

Many public servants have been on the front lines of the pandemic, making personal sacrifices to keep the rest of us safe. Nonprofits are still recovering jobs lost in the last year, and some public service workers have reported they are considering leaving public service altogether.

Frontline sectors like teaching and healthcare are already seeing burnout and employee shortages. Alleviating some of the financial strain associated with student debt can help borrowers in these sectors as they continue to navigate the fallout of this pandemic. The Department will be offering a temporary opportunity to give borrowers credit for prior payments they made that would not otherwise count toward PSLF.

Any prior payments made while working for a qualifying employer will count as a qualifying payment, regardless of loan type or repayment plan. This Limited PSLF Waiver will apply to borrowers with Direct Loans, those who have already consolidated into the Direct Loan Program, and those with other types of federal student loans who submit a consolidation application into the Direct Loan Program while the waiver is in effect. The waiver applies to loans taken out by students. The waiver will run through October 31, That means borrowers who need to consolidate will have to submit a consolidation application by that date.

Similarly, borrowers will need to submit a PSLF form—the single application used for a review of employment certification, payment counts, and processing of forgiveness—on or before October 31, to have previously ineligible payments counted. Counting prior payments on additional types of loans will be particularly important for borrowers who have or had loans from the Federal Family Education Loan FFEL Program.

Around 60 percent of borrowers who have certified employment for PSLF fall into this category. Payments prior to a Direct Loan consolidation are also covered by this waiver, so it will benefit those who consolidated their Direct Loans and lost progress toward PSLF as a result. The Department will start automatically adjusting payment counts for borrowers who have already consolidated their loans into the Direct Loan Program and certified some employment for PSLF, and those borrowers can expect to see these adjustments in their accounts in the coming months.

Borrowers who have loans from the FFEL or Federal Perkins Loan programs will also have this waiver applied automatically, but only after they have consolidated and submitted a PSLF form, and all paperwork has been processed. Simplify what it means for a payment to qualify for PSLF. In some instances, borrowers missed out on credit toward PSLF because their payments were off by a penny or two or late by only a few days. The Department will automatically adjust PSLF payment counts for payments made on or before October 31, for borrowers affected by this issue who have already certified some employment for PSLF.

Borrowers who have not yet applied for PSLF forgiveness or certified employment but do so by October 31, will benefit from these temporary rules as well. The fixed rate is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. If the weighted average interest on the loans is 5. If you are interested in canceling your direct consolidation loan application, your should contact your loan servicer for more information.

However, there is no way to reverse or undo a student loan consolidation. Direct loan consolidation allows students to consolidate their loans for streamlined payments. The terms on a consolidated loan range from seven to 30 years, depending on the balance and repayment schedule. Department of Education. Federal Student Aid. Student Loans. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.

Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Loan Basics Student Loans. Table of Contents Expand. What Is a Direct Consolidation Loan? Understanding the Loans. The Loan Process. Advantages and Disadvantages. Is It the Right Choice? Key Takeaways A direct consolidation loan is a type of federal loan that combines two or more federal education loans into a single loan with a fixed interest rate based on the average rate of the loans being consolidated.

Loan consolidation can also give someone access to additional loan repayment plans and forgiveness programs. Pros of Direct Loan Consolidation Lower monthly payments One monthly payment Different repayment options Access to loan forgiveness options A fixed interest rate that may be lower than the rates on the previous loans. Cons of Direct Loan Consolidation Pay more interest over life of loan No grace period Prior loan payments do not count towards loan forgiveness requirements You may lose some benefits by consolidating your loans.

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