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Frequently Asked Questions
  • What are the benefits of a Direct Consolidation Loan?

    Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

    One Lender and One Monthly Payment
    With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.

    Flexible Repayment Options
    Borrowers can choose from multiple plans to repay their Direct Consolidation Loan, including an Income Contingent Repayment Plan. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at anytime.

    No Minimum or Maximum Loan Amounts or Fees
    There is no minimum amount required to qualify for a Direct Consolidation Loan! In addition, consolidation is free.

    Varied Deferment Options
    Borrowers with Direct Consolidation Loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a Direct Consolidation Loan may renew many of those deferment options. In addition, borrowers may be eligible for additional deferment options if they have an outstanding balance on a FFEL Program loan made before July 1, 1993, when they obtain their first Direct Loan.

    Reduced Monthly Payments
    A Direct Consolidation Loan may ease the strain on a borrower’s budget by lowering the borrower’s overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower’s Federal education loans.

    Retention of Subsidy Benefits
    There are two (2) possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.

    Temporary In-School Consolidation Authority
    During a one (1) year period, borrowers who meet certain requirements may consolidate loans that are in an in-school status into a Direct Consolidation Loan. Direct Consolidation Loans may be made under this temporary provision to borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011.

    Borrowers will lose the grace period on a FFEL Subsidized/Unsubsidized Stafford Loan or Direct Subsidized/Unsubsidized Loan by consolidating the loan while it is in an in-school status. Similarly, PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose the six (6) month post-enrollment deferment period. Parent PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose eligibility to defer repayment while the student for whom the loan was obtained is in school. Click here for information on the eligibility requirements for this temporary provision.

  • What are the differences between FFEL Consolidation vs. Direct Consolidation?

    Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

    One Lender and One Monthly Payment
    With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.

    Flexible Repayment Options
    Borrowers can choose from multiple plans to repay their Direct Consolidation Loan, including an Income Contingent Repayment Plan. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at anytime.

    No Minimum or Maximum Loan Amounts or Fees
    There is no minimum amount required to qualify for a Direct Consolidation Loan! In addition, consolidation is free.

    Varied Deferment Options
    Borrowers with Direct Consolidation Loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a Direct Consolidation Loan may renew many of those deferment options. In addition, borrowers may be eligible for additional deferment options if they have an outstanding balance on a FFEL Program loan made before July 1, 1993, when they obtain their first Direct Loan.

    Reduced Monthly Payments
    A Direct Consolidation Loan may ease the strain on a borrower’s budget by lowering the borrower’s overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower’s Federal education loans.

    Retention of Subsidy Benefits
    There are two (2) possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.

    Temporary In-School Consolidation Authority
    During a one (1) year period, borrowers who meet certain requirements may consolidate loans that are in an in-school status into a Direct Consolidation Loan. Direct Consolidation Loans may be made under this temporary provision to borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011.

    Borrowers will lose the grace period on a FFEL Subsidized/Unsubsidized Stafford Loan or Direct Subsidized/Unsubsidized Loan by consolidating the loan while it is in an in-school status. Similarly, PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose the six (6) month post-enrollment deferment period. Parent PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose eligibility to defer repayment while the student for whom the loan was obtained is in school. Click here for information on the eligibility requirements for this temporary provision.

  • Who is eligible for a Direct Consolidation Loan?

    Borrowers are encouraged to check with their existing loan holders or servicers to find out about consolidation options available to them. Some differences between programs may include:

    • Minimum balances or numbers of loans required to apply.
    • Types of loans that can be consolidated.
    • A prior account relationship may be required.
    • Repayment incentive benefits to encourage good repayment behavior.
    • The convenience of electronic debit, ensuring that monthly payments are made on time.
    • Repayment plans offered, such as payments sensitive to a borrower’s income, family size, and total education indebtedness.
  • Can I obtain a Direct Consolidation Loan if I don’t have any Direct Loans?

    Yes, borrowers without any Direct Loans may be eligible for a Direct Consolidation Loan if they include at least one FFEL Loan and have been unable to obtain a Federal Consolidation Loan with a FFEL consolidation lender or have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them or intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program.
    NOTE: The Direct Loan Servicing Center has information on the Public Loan Service Forgiveness Program.

  • Can I consolidate a PLUS Loan?

    Yes, PLUS Loans can be consolidated into a Direct Consolidation Loan.

  • Can I consolidate Perkins Loans?

    Yes, it is possible to consolidate Perkins Loans into a Direct Consolidation Loan if borrowers include at least one Direct Loan or Federal Family Education Loan (FFEL) in their request. Perkins Loans cannot be included in a Direct Consolidation Loan by themselves. Furthermore, all Perkins Loans consolidated into the Direct Loan Program will be included in the unsubsidized portion of the Direct Consolidation Loan.

    Borrowers should carefully weigh the advantages and disadvantages of including a Perkins Loan in a consolidation loan. While the borrowers gain the benefits of the Direct Consolidation Loan Program, they also lose the benefits associated with the Perkins Loan Program.

    We recommend that you consider the following points prior to making a decision:

    Perkins Loans are eligible for additional cancellation benefits, such as performing certain kinds of public service. This benefit is lost when a Perkins Loan is included in a Direct Consolidation Loan.
    Perkins Loans have a grace period of 6-9 months. When a Perkins loan is consolidated, any remaining grace period is lost.
    Interest does not accrue when a Perkins Loan is placed in deferment. Since a Perkins Loan is included in the unsubsidized portion of a Direct Consolidation Loan, borrowers are responsible for interest that accrues throughout the deferment period.
    Perkins Loans generally have a lower interest rate but have a less flexible repayment period of 10 years.

    The Direct Consolidation Loan Program offers standard, graduated, extended and income contingent repayment plans which may lower monthly payments.

    NOTE:Lower payments and extended repayment terms can increase the overall finance charges incurred over the life of loan.

  • Can I consolidate health professions loans?

    Yes, With a Direct Consolidation Loan, borrowers can include certain health profession loans sponsored through the U.S. Department of Health and Human Services with other Federal education loans in their Direct Consolidation Loan. Borrowers must include at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan in the Direct Consolidation Loan.

    Eligible Health Professions Loans
    Health Professions Student Loans (HPSL)
    Health Education Assistance Loans (HEAL)
    Loans for Disadvantaged Students (LDS)
    Nursing Student Loans (NSL)
    The Advantages

    Direct Consolidation Loans offer many advantages to borrowers of health professions loans. These include:

    a longer repayment period;
    a lower monthly payment; AND
    a single monthly payment

    When deciding to consolidate a health professions loans, consider the following advantages:

    Borrowers who have defaulted on a HEAL may include the collection costs and late fees in a Direct Consolidation Loan. These fees may not be included in HEAL Refinancing.
    Under the Direct Consolidation Loan Program, HEAL borrowers may repay under the Income Contingent Repayment (ICR) Plan for the life of the loan. HEAL lenders are only required to offer an ICR Plan for the first five years
    To qualify for an in-school deferment, Direct Consolidation Loan borrowers must be attending school at least half-time. HPSL, HEAL, and LDS borrowers are required to attend school full time to be eligible for an in-school deferment.

    Issues to Consider
    Before applying for a Direct Consolidation Loan, consider the following points:

    HEAL loans have fixed or variable rate that are tied to the average 91-day Treasury bill rate plus 3 percentage points. There is no maximum interest rate for variable rate HEAL loans. In contrast, the interest rate for a Direct Consolidation Loan is based on the weighted average of the interest rates on loans being consolidated, rounded to the nearest higher one-eighth of one percent. It is a fixed rate and will not exceed 8.25 percent.
    The interest on some health professions loans is subsidized by the U.S. Department of Health and Human Services. This interest subsidy is lost when these loans are included in a Direct Consolidation Loan.
    Interest does not accrue during deferment for HPSL, LDS, and NSL borrowers. Interest does accrue during deferment on the portion of Direct Consolidation Loans that include health professions loans.
    Borrowers who consolidate Health Professions Loans do not retain the deferment benefits that apply to those loans. However, they gain the deferment benefits that apply to Direct Consolidation Loans. For example, a borrower may be eligible for additional deferments if they have an outstanding balance on a FFEL made before July 1, 1993, when they obtain their first Direct Loan.

  • Can I consolidate my loans if I am in school?

    Yes and No. Effective for Direct Consolidation Loan applications received on or after July 1, 2006, borrowers who are enrolled in school cannot consolidate loans that are in an
    in-school status
    . These are loans that have not yet entered or used up the 6-month grace period entitlement.

    Borrowers still
    can
    consolidate loans that are in
    grace,
    repayment
    or
    deferment

    Borrowers can add loans to an existing consolidation for up to 180 days after the Direct Consolidation Loan was first disbursed. If more than 180 days has passed, borrowers can apply for a new Direct Consolidation Loan. The new consolidation loan can include the original Direct Consolidation loan and must include another eligible outstanding Federal education loan.

    Example: A borrower who has education loans stopped attending school for a year and the loans used up the 6-month grace period and entered repayment. The borrower returned to school and obtained a new loan. While enrolled, the borrower applies for a Direct Consolidation Loan. The Direct Consolidation Loan can include the first group of loans the borrower received, but not the newly received loans. Once the borrower leaves school again he or she can add these new loans to the existing consolidation loan or submit a new Direct Loan Consolidation application to combine the original consolidation loan and the other remaining loans.

    Temporary In-School Consolidation Authority

    Borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011 may qualify to consolidate loans that are in an in-school status into a Direct Consolidation Loan. During this one (1) year period, borrowers who meet the following requirements may consolidate loans that are in an in-school status into a Direct Consolidation Loan.

    Note:
    Borrowers will lose the grace period on a FFEL Subsidized/Unsubsidized Stafford Loan or Direct Subsidized/Unsubsidized Loan by consolidating the loan while it is in an in-school status. Similarly, PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose the six (6) month post-enrollment deferment period. Parent PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose eligibility to defer repayment while the student for whom the loan was obtained is in school.

    Eligibility Requirements:

      1. Borrowers must have one (1) or more loans in two (2) or more of the following categories:

      • Direct Loan Program loan
      • FFEL Program loan that has been purchased by the U.S. Department of Education
      • FFEL Program loan held by an eligible lender
      2. At least one of the above loans must not yet have entered repayment.

    Note:
    A different interest rate calculation may apply to loans that are consolidated under the Temporary In-School Consolidation Authority. Please
    click here
    for more detailed information.

  • What special conditions apply if I am in already in repayment?

    Borrowers in repayment who want to consolidate their Federal education loans should continue making payments until their loan holder notifies them that their loans are paid in full.
  • Can I consolidate jointly with my spouse?

    Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.
  • How is the amount of my payment calculated under the Income Contingent Repayment Plan?

    The ICR Plan is designed to keep payments affordable. Generally, you pay the lesser of:

    • the amount you would pay if you repaid your loan in 12 years, multiplied by an income percentage factor that varies with annual income, or
    • 20 percent of your discretionary income (AGI minus the poverty level for your family size)

    Under the ICR Plan, the monthly payment is $0 for borrowers with family incomes that are less than or equal to the U.S. Department of Health and Human Services poverty level for their family size. Borrowers whose calculated monthly payment is greater than $0 but less than $5 are required to make a $5 monthly payment. Other borrowers must pay the calculated monthly payment.

    Until the Department receives income information from the IRS or alternative documentation of income, borrowers’ monthly payments are equal to the interest that accrues each month. If they are unable to make the interest-only payments, borrowers may request a forbearance until the first scheduled Income Contingent Repayment (ICR) Plan payment is due.

    The monthly payment in
    Example E
    is calculated as follows:

    Step 1:

    Multiply the principal balance by the constant multiplier for 8.25 percent interest (0.0109621)

    $15,000 x 0.0109621 = $164.4315

    Step 2:

    Multiply the result by the income percentage factor that corresponds to the borrower’s income.

    88.77 (0.8877) x 164.4315 = $146

    Step 3:

    Determine 20 percent of discretionary income (based on the poverty guidelines for a family of one).

    ($30,000 – $10,210) x 0.20 / 12 = $329.83

    Step 4:

    Payment is the amount determined in step 2 because it is less than 20 percent of discretionary income.

    NOTE:
    This example is based on the 2007 income percentage factors and U.S. Department of Health and Human Services (HHS) poverty level guidelines.

  • Can I consolidate my loans if I am enrolled in school?

    Yes and No. Effective for Direct Consolidation Loan applications received on or after July 1, 2006, borrowers who are enrolled in school cannot consolidate loans that are in an in-school status. These are loans that have not yet entered or used up the 6-month grace period entitlement.

    Borrowers still can consolidate loans that are in grace, repayment or deferment

    Borrowers can add loans to an existing consolidation for up to 180 days after the Direct Consolidation Loan was first disbursed. If more than 180 days has passed, borrowers can apply for a new Direct Consolidation Loan. The new consolidation loan can include the original Direct Consolidation loan and must include another eligible outstanding Federal education loan.

    Example: A borrower who has education loans stopped attending school for a year and the loans used up the 6-month grace period and entered repayment. The borrower returned to school and obtained a new loan. While enrolled, the borrower applies for a Direct Consolidation Loan. The Direct Consolidation Loan can include the first group of loans the borrower received, but not the newly received loans. Once the borrower leaves school again he or she can add these new loans to the existing consolidation loan or submit a new Direct Loan Consolidation application to combine the original consolidation loan and the other remaining loans.

    Temporary In-School Consolidation Authority
    Borrowers whose consolidation applications are received on or after July 1, 2010 and before July 1, 2011 may qualify to consolidate loans that are in an in-school status into a Direct Consolidation Loan. During this one (1) year period, borrowers who meet the following requirements may consolidate loans that are in an in-school status into a Direct Consolidation Loan.

    Note: Borrowers will lose the grace period on a FFEL Subsidized/Unsubsidized Stafford Loan or Direct Subsidized/Unsubsidized Loan by consolidating the loan while it is in an in-school status. Similarly, PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose the six (6) month post-enrollment deferment period. Parent PLUS borrowers who consolidate a Federal PLUS Loan or Direct PLUS Loan that was first disbursed on or after July 1, 2008 will lose eligibility to defer repayment while the student for whom the loan was obtained is in school.

    Eligibility Requirements:
    1. Borrowers must have one (1) or more loans in two (2) or more of the following categories:

    Direct Loan Program loan
    FFEL Program loan that has been purchased by the U.S. Department of Education
    FFEL Program loan held by an eligible lender

    2. At least one of the above loans must not yet have entered repayment.

    Note: A different interest rate calculation may apply to loans that are consolidated under the Temporary In-School Consolidation Authority. Please click here for more detailed information.

  • Can I consolidate an existing consolidation loan?

    Yes, under three conditions:

    Borrowers can consolidate existing consolidation loans into a new Direct Consolidation Loan if they include at least one other FFEL or Direct Loan into the new consolidation loan.
    Borrowers can consolidate a single Federal Consolidation Loan if the loan is in default status or has been submitted to a guaranty agency for default aversion by the loan holder.
    Borrowers can consolidate a single Federal Consolidation Loan if they intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program.

    NOTE: The Direct Loan Servicing Center has information on the Public Service Loan Forgiveness Program.

  • Can I consolidate my loans that are in grace?

    Yes, Borrowers who consolidate loans that are in grace may receive a lower interest rate on their Direct Consolidation Loans if they are consolidating variable rate loans. However, once grace status loans are consolidated borrowers lose any remaining grace period. Borrowers receive their first bills within 60 days after the new Direct Consolidation Loan is made.

    The timing in which an application is submitted is important:

    Loans first disbursed on or after July 1, 2006 have fixed interest rates. While borrowers with fixed interest rate loans can consolidate while in grace, there is no benefit to do so since the interest rates for in-grace and in-repayment are the same.
    Borrowers with variable interest rate loans should apply for Direct Consolidation Loans while their loans are in the grace status in order for them to receive the possible interest rate benefit.
    Since repayment begins within 60 days of the day the Direct Consolidation Loan is made, borrowers should not apply too early in their loans’ grace periods; otherwise borrowers lose any remaining grace period. For example, if a borrower’s loans are consolidated during the second month of grace, they would begin repayment within 60 days, thus forfeiting the remaining portion of the grace period. Therefore, borrowers should wait until about half-way through the 6-month grace period before applying for a Direct Consolidation Loan.

  • Can I Consolidate a Defaulted Loan?

    Generally, Federal education loan(s) in default may be consolidated in a Direct Consolidation Loan if borrowers:

    Agree to repay the loan(s) under the Income Contingent Repayment Plan.

    OR

    Make satisfactory repayment arrangements with the current loan holder(s).

    If, before applying for consolidation, borrowers who want to completely clear the default notation from their credit records, they may want to consider another option: loan rehabilitation. Borrowers should contact their loan holders to obtain more information about this option.

    Borrowers cannot consolidate defaulted loans under these conditions:

    If a judgment has been issued against a defaulted loan, it cannot be included in the consolidation unless the judgment order has been vacated (dismissed).

    If they are trying to consolidate defaulted Direct Consolidation Loans.
    If they are trying to consolidate defaulted FFEL Consolidation Loans unless they have made satisfactory repayment arrangements with their current loan holder OR the borrowers agree to repay under the Income Contingent Repayment Plan.
    If they are trying to consolidate defaulted Perkins or health professions loans unless they have made satisfactory repayment arrangements with their current loan holders.

    Note: Borrowers with defaulted FFEL or Direct Loan Program loans may be liable for collection costs incurred to collect the loans. If the holder of the defaulted loan, which may be either the U.S. Department of Education or a guaranty agency, retains a collection agency to collect defaulted loans, charges imposed by the collection agency may be added to the amount borrowers owe. This means that the amount of the Direct Consolidation Loan may include collection costs of up to 18.5% of the principal and interest outstanding on the defaulted loan.

    For defaulted Perkins Loans and health professions loans, collection costs may equal as much as the amount owed at the time the defaulted loan is paid off through consolidation.

  • Can I delay processing of my consolidation application?

    Yes, you can delay the processing of your Direct Consolidation Loan until closer to the end of your grace period end date if any of the loans you want to consolidate are in a grace period.

    Normally, when you consolidate your existing loan(s) into a new Direct Consolidation Loan, you will be required to start repayment of your new loan immediately. However, if any loan you want to consolidate is still in a grace period, you can delay entering repayment on your new Direct Consolidation Loan until closer to your grace period end date by entering your expected grace period end date (month and year) in the space provided on the application. We will start processing your application about 45 days before the expected grace period end date that you provide. If you leave the expected grace period end date blank on your consolidation application, your Direct Consolidation Loan will enter repayment immediately.

    You can select a date up to nine (9) months into the future. If your grace end date is more than 9 months away, wait to submit your application.

  • Should I rehabilitate before consolidating my defaulted loan?

    Rehabilitation or Consolidation?

    There are many benefits to rehabilitating a defaulted loan before consolidation. If you consolidate a
    defaulted loan without rehabilitating it , your credit record continues to show a default status on the loan. This is true even after the consolidation loan pays off the defaulted loan in full.

    Consolidating a defaulted loan will result in your credit report bearing the notation that the loan was in default but then “paid in full.” This notation will remain on the credit report for up to seven years. While a “paid in full” notation is preferable to an unpaid default, , there is still the possibility that lenders will deny you future credit, such as mortgages, auto loans, or credit cards because of this notation.

    However, if you rehabilitate a defaulted loan before consolidating it , the loan holder will update your credit record to no longer reflect the default status of the rehabilitated loan(s).

    Rehabilitating a defaulted Direct Loan or FFEL loan requires that you make at least nine (9) full payments of an agreed amount within twenty (20) days of their monthly due dates over a ten (10) month period. Rehabilitating a defaulted Perkins loan requires twelve (12) on-time monthly payments. Contact your loan holder to obtain additional rehabilitation terms and conditions for your loan type.

    Keep in mind that if you default on your loan, you are liable for any collection costs incurred to collect the loan. If you pay off the defaulted loan by taking out a Consolidation Loan, the amount you borrow must be enough to pay off your defaulted loan, including principal, interest, and collection costs. This means that the amount of the new loan may need to be up to 18.5% larger than the principal and interest outstanding on your defaulted loan.

    Both rehabilitation and consolidation will reinstate your eligibility for additional Federal student aid under Title IV of the Higher Education Act (Pell Grants, FFEL and Direct Loans etc.)

  • What are the consequences of defaulting?

    Borrowers who fail to make a payment on time are considered delinquent on their Direct Consolidation Loans. Borrowers who do not make payments for 270 days are in default. Defaulting has severe and long-lasting consequences, as follows:

    The Department of Education can immediately demand repayment of the total loan amount due.
    The Department of Eduction will attempt to collect the debt and may charge collection costs.
    The Department of Education reports defaulted loans to national credit bureaus, damaging borrowers’ credit ratings and, making it difficult for borrowers to make purchases such as cars or homes.
    Borrowers with loans in default are ineligible for Title IV student aid.
    Borrowers with loans in default are ineligible for deferments
    The Internal Revenue Service can withhold borrowers’ Federal income tax refunds.
    Borrowers’ wages may be garnished.

    It is important that borrowers with Direct Consolidation Loans stay in touch with the Direct Loan Servicing Center. Default can occur when borrowers fail to keep the Direct Loan Servicing Center up to date on address and name changes, causing billing statements to go astray. In addition, the Direct Loan Servicing Center can offer alternatives when borrowers have trouble making monthly payments. Borrowers may apply for a deferment or forbearance, or change repayment plans.

  • What are the repayment plans?

    When repaying a Direct Consolidation Loan, you may choose from multiple repayment plans with various terms.
    Standard Repayment Plan:

    You will pay a fixed amount each month until your loan(s) are paid in full. Your monthly payments will be at least $50 for up to 10 to 30 years, based on your total education indebtedness.

    Graduated Repayment Plan:

    Your minimum payment amount will be at least equal to the amount of interest accrued monthly. Your payments start out low, and then increase every two years for up to 10 to 30 years, based on your total education indebtedness

    Extended Repayment Plan:

    To be eligible, your Direct Loan balance must be greater than $30,000 and you will have up to 25 years to repay your loan(s). You have two payment options:

    Fixed Monthly Payment Option -You will pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50.
    Graduated Monthly Payment Option – Your minimum payment amount will be at least $50 or the amount of interest accrued monthly, whichever is greater. Your payments start out low, and then increase every two years.

    Income Contingent Repayment Plan (ICR):

    Your monthly payments will be based on annual income, Direct Loan balance and family size, and are spread over a term of up to 25 years.

    Income-Based Repayment Plan (IBR):

    Your monthly payments will be based on annual income and family size, and spread over a term of up to 25 years. You must be experiencing a partial financial hardship to initially select this plan and once you select this plan you cannot change to any other plan except the Standard Plan.

    If you consolidate more than one loan type (subsidized, unsubsidized and PLUS) you will have one Direct Consolidation Loan with up to two parts: Direct Subsidized and Direct Unsubsidized (which includes PLUS) Consolidation Loans. Even with up to two parts of each Direct Consolidation Loan, you make only one payment each month.

    If you have not chosen a repayment plan, are not required to pay using ICR, and we determine that you currently have other active Direct Loans, we may assign your new Direct Consolidation Loan(s) to the same repayment plan as your active loan(s). If you do not currently have active
    Direct Loan(s), we may assign your new Direct Consolidation Loan(s) to the Consolidation Standard Repayment Plan. You can change at a later date to other plans for which you may be eligible.

    Standard Repayment Plan

    Under this plan, you will pay a fixed amount of at least $50 each month for up to 10 to 30 years, based on your total education indebtedness. This plan may result in lower total interest paid when compared to repayment under one of the graduated plans.(See Example A and the Standard and Graduated Repayment Plan Repayment Periods Table)

    Graduated Repayment Plan

    Under this plan, you will pay a minimum payment amount at least equal to the amount of interest accrued monthly for up to 10 to 30 years, based on your total education indebtedness. Your payments start out low, and then increase every two years. Generally, the amount you will repay over the term of your loan will be higher under the Graduated Repayment Plan than under the Standard Repayment Plan. This plan may be beneficial if your income is low now but is likely to steadily increase. (See Example B and the Standard and Graduated Repayment Plan Repayment Periods Table)

    Extended Repayment Plan

    To qualify for this plan, your Direct Loan balance (your new Direct Consolidation Loan Amount plus other Direct Loans) must be greater than $30,000. Your plan options are:

    Fixed Monthly Payment Option – Under this plan, you will pay a fixed amount of at least $50 each month for up to 25 years. Repayment under this plan will result in lower total interest paid when compared to graduated plans with similar terms. (See Example C and the Extended Repayment Plan Repayment Periods Table)

    Graduated Monthly Payment Option – Under this plan, you will pay a minimum payment amount of at least $50 or the amount of interest accrued monthly, whichever is greater, for up to 25 years. Your payments start out low and then increase every two years. Repayment under this plan may provide lower initial monthly payments, although the total interest paid may be greater when compared to plans with similar terms with fixed payments. This plan may be beneficial if your income is low now but is likely to steadily increase. (See Example D and the Extended Repayment Plan Repayment Periods Table)

    **Extended repayment terms are available to Direct Loan borrowers with no outstanding principal or interest balances as of October 7, 1998 and with more than $30,000 in Direct Loans.

    Income Contingent Repayment (ICR) Plan

    The ICR Plan gives you the flexibility to meet your obligations without causing you financial hardship. Monthly payments are based on annual Adjusted Gross Incomes (AGI), loan balance and family sizes. Income is obtained from the Internal Revenue Service (IRS) or from an ICR Plan & IBR Plan Alternative Documentation of Income Form (discussed below) submitted by you. (See Example E)

    To participate in the ICR Plan, you (and if married, your spouse) must sign the ICR Plan & IBR Plan Consent to Disclosure of Tax Information Form. This authorizes the IRS to release borrowers’ income information to the Department of Education (the Department) to calculate monthly payments. As an alternative to having the Department obtain your (and your spouse’s, if applicable) AGI directly from the IRS, you may submit a copy of your most recently filed federal tax return (1040, 1040A, 1040EZ). Monthly payments are adjusted annually to reflect inflation, family size and income.

    NOTE: If your (and your spouse’s, if applicable) AGI is not available when income information is requested from the IRS or if the AGI from your most recently filed tax return does not reasonably reflect your (and your spouse’s, if applicable) current income, the supporting documentation that you submit for alternative documentation of income will be used to calculate taxable gross income in lieu of AGI which may result in a higher monthly payment amount.

    Monthly payment amounts for some borrowers may not be enough to cover the interest accruing on their loans. This situation is referred to as negative amortization. In such cases, the unpaid interest is capitalized and added to the principal balance once per year. The amount added to the principal balance will never exceed 10 percent of the original Direct Consolidation Loan amount. Once this capitalization limit has been reached, interest continues to accrue but is not capitalized. The capitalization limit does not apply to interest that accrues during deferment or forbearance.

    Under this plan, it is possible you will not make payments large enough to pay off your loans in 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income.

    Alternative Documentation of Income

    Alternative documentation of income is required for Direct Consolidation Loan borrowers if their underlying loans were in the first or second year of repayment when they were consolidated. Alternative documentation includes pay stubs, canceled checks, or, if these are unavailable, signed statements explaining income resources.

    Income-Based Repayment (IBR) Plan

    The IBR Plan gives you the flexibility to meet your obligations without causing you financial hardship. Monthly payments are based on annual Adjusted Gross Incomes (AGI), family size, and you must be experiencing a partial financial hardship to initially select this plan. Income is obtained from the Internal Revenue Service (IRS) or from an ICR Plan & IBR Plan Alternative Documentation of Income Form (discussed below) submitted by you. (See Example F)

    To participate in the IBR Plan, you (and if married and file a joint federal income tax return, your spouse) must sign the ICR Plan & IBR Plan Consent to Disclosure of Tax Information Form. This authorizes the IRS to release your (and your spouse’s, if applicable) income information to the Department of Education (the Department) to calculate monthly payments. As an alternative to having the Department obtain your (and your spouse’s, if applicable) AGI directly from the IRS, you may submit a copy of your most recently filed federal tax return (1040, 1040A, 1040EZ). Monthly payments are adjusted annually to reflect a change in income, a change in family size, or changes to your partial financial hardship status.

    NOTE: If your (and your spouse’s, if applicable) AGI is not available when income information is requested from the IRS or if the AGI from your most recently filed tax return does not reasonably reflect your (and your spouse’s, if applicable) current income, the supporting documentation that you submit for alternative documentation of income will be used to calculate taxable gross income in lieu of AGI which may result in a higher monthly payment amount.

    Monthly payment amounts for some borrowers may not be enough to cover the interest accruing on their loans. This situation is referred to as negative amortization. If your payment does not cover all of the interest accumulating monthly on your Direct Subsidized Loans or Direct Subsidized Consolidation Loans, you will not be charged the remaining portion of the interest on those loans for a period not to exceed three consecutive years from the time you begin repayment under the IBR Plan.

    Under this plan, it is possible you will not make payments large enough to pay off your loans in 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income.

    NOTE: The IBR Plan is not available for parent Direct PLUS Loans, Direct PLUS Consolidation Loans, or Direct Consolidation Loans that repaid parent Direct PLUS Loans or Federal Family Education Loan Program PLUS Loans made to parent borrowers. If you choose to include any ineligible loans, the resulting new Consolidation Loan cannot be repaid under the IBR Plan.

    Alternative Documentation of Income

    It is recommended that you provide Alternative Documentation of Income with your consolidation application. If you submit the income information with the application and we determine you are qualified for a partial financial hardship, you may be able to start repaying your new consolidation loan under the IBR Plan immediately. Otherwise, Direct Loan Servicing will request that you submit your income information and, until it is received, your initial monthly payment amounts will be based on the Standard repayment plan. Alternative documentation includes pay stubs, canceled checks, or, if these are unavailable, signed statements explaining income resources.

  • How is the amount of my payment calculated under the ICR Plan?

    The ICR Plan is designed to keep payments affordable. Generally, you pay the lesser of:
    the amount you would pay if you repaid your loan in 12 years, multiplied by an income percentage factor that varies with annual income, or
    20 percent of your discretionary income (AGI minus the poverty level for your family size)

    Under the ICR Plan, the monthly payment is $0 for borrowers with family incomes that are less than or equal to the U.S. Department of Health and Human Services poverty level for their family size. Borrowers whose calculated monthly payment is greater than $0 but less than $5 are required to make a $5 monthly payment. Other borrowers must pay the calculated monthly payment.

    Until the Department receives income information from the IRS or alternative documentation of income, borrowers’ monthly payments are equal to the interest that accrues each month. If they are unable to make the interest-only payments, borrowers may request a forbearance until the first scheduled Income Contingent Repayment (ICR) Plan payment is due.

    The monthly payment in Example E is calculated as follows:

    Step 1:

    Multiply the principal balance by the constant multiplier for 8.25 percent interest (0.0109621)
    $15,000 x 0.0109621 = $164.4315

    Step 2:

    Multiply the result by the income percentage factor that corresponds to the borrower’s income.
    88.77 (0.8877) x 164.4315 = $146

    Step 3:

    Determine 20 percent of discretionary income (based on the poverty guidelines for a family of one).
    ($30,000 – $10,210) x 0.20 / 12 = $329.83

    Step 4:

    Payment is the amount determined in step 2 because it is less than 20 percent of discretionary income.

    NOTE: This example is based on the 2007 income percentage factors and U.S. Department of Health and Human Services (HHS) poverty level guidelines.

  • How is the amount of my payment calculated under the IBR Plan?

    The IBR Plan, like the ICR Plan, is designed to keep payments affordable.

    You must be experiencing a partial financial hardship to initially select this plan. A partial financial hardship is a circumstance in which the annual amount due on all your eligible loans (see the Repayment Plan Selection form for a definition of “eligible loans”) at the time you entered repayment, as calculated under a 10-year Standard Repayment Plan, exceeds 15 percent of the difference between your Adjusted Gross Income (AGI) and 150 percent of the poverty guideline for your family size.

    Under this plan, your required monthly payment will be no more than 15 percent of the amount by which your AGI exceeds 150 percent of the poverty line income for your family size and state, divided by 12. In addition:

    If the calculated payment is less than $5.00 your required monthly payment will be $0.00.
    If the calculated payment is equal to or greater than $5.00, but less than $10.00, your required monthly payment will be $10.00.
    If all of your eligible loans are not Direct Loans, your monthly payment amount will be determined by multiplying the calculated monthly payment by the percentage of the total amount of your eligible loans that are Direct Loans.

    Under the IBR Plan, the minimum monthly payment is $0 or $10.00 (or $50.00 if you are no longer experiencing a partial financial hardship).

    If you are married and file your federal income taxes jointly with your spouse, both your AGI and your spouse’s AGI will be used to calculate your monthly payment. If you and your spouse file taxes separately, only your AGI will be used to calculate your monthly payment.

    Your repayment amount may be adjusted annually. It may be higher or lower depending on changes in your income. In special circumstances when your federal tax return does not reflect your present income (for example, due to loss of employment), you may submit documentation of your current income. Your monthly payment will be based on this documented income information.

    If you no longer have partial financial hardship, your monthly payment amount will be adjusted. Your adjusted payment amount will not exceed the amount required to pay your loan in full under a 10-year Standard Repayment Plan based on the amount of your eligible loans that was outstanding at the time you began repayment under the IBR Plan (minimum of $50.00). The repayment period based on this recalculated payment amount may be more than 10 years.

    If at any time you are unable to make the payments, you may request a temporary forbearance to postpone payments.

  • What is Alternative Documentation of Income?

    A form that is used to accurately identify the income level of borrowers that are requesting to repay or are currently repaying their loan(s) under the Income Contingent Repayment (ICR) or Income-Based Repayment (IBR) Plan. The Alternative Documentation of Income (ADOI) form is required:

    for borrowers that are in their first year of repayment;
    for borrowers that are in their second year of repayment that have been notified that alternative documentation of income is required; or
    for borrowers that have been notified that the Internal Revenue Service (IRS) is unable to provide the U.S. Department of Education with their (or spouse’s, if applicable) Adjusted Gross Income (AGI)used.

    Borrowers may also choose to submit the Alternative Document of Income form if they believe that their (or spouse’s, if applicable) AGI, as reported on their most recently filed federal tax return, does not reasonably reflect their current income such as in loss or change in employment.

    NOTE: If your (and your spouse’s, if applicable) AGI is not available when income information is requested from the IRS or if the AGI from your most recently filed tax return does not reasonably reflect your (and your spouse’s, if applicable) current income, the supporting documentation that you submit for alternative documentation of income will be used to calculate taxable gross income in lieu of AGI which may result in a higher monthly payment amount.

  • Can I change repayment plans?

    Yes. Most borrowers may change repayment plans at any time. However, borrowers who are required to repay under the ICR plan must make three consecutive monthly payments before changing to another plan. There is no limit to the number of times borrowers may change plans.

    A borrower may change to the ICR plan at any time. After the change, the borrower’s repayment period will be a maximum of 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income. (The ICR Plan is NOT available if you have a Direct PLUS Consolidation Loan(s) made before July 1, 2006 and/or a Direct PLUS Loan(s). However, you are eligible to repay any Direct Consolidation Loan(s) made on/after July 1, 2006 under the ICR Plan even if it includes a PLUS Loan(s).)

    A borrower may change to the IBR plan at any time. After the change, the borrower’s repayment period will be a maximum of 25 years. If loans are not fully repaid after 25 years of repayment, any unpaid amount will be forgiven. The maximum 25-year repayment period may include prior periods of repayment under certain other repayment plans, and certain periods of economic hardship deferment. The forgiven amount may be considered taxable income. If you choose to leave the IBR Plan at any time, your account will be placed on the Standard repayment plan. You cannot change to any plan other than Standard at any time after being on the IBR repayment plan.

    A borrower may change to another plan as long as the new plan has a repayment term that is longer than the amount of time the borrower has already spent in repayment. The new repayment term is determined by subtracting the amount of time a borrower has spent in repayment from the term allowed under the new plan.

  • How long does it take to consolidate my loans once I submit my application?

    The consolidation process generally takes 60-90 days. Using our online Web application can reduce the amount of time it takes to consolidate a borrower’s loan.

  • When can I expect my first monthly payment to be due?

    Borrowers will receive an initial billing statement from the Direct Loan Servicing Center within 60 days of the first disbursement of their Direct Consolidation Loan. Payments are due monthly.

  • How do I make payments?

    Borrowers receive monthly billing statements from the Direct Loan Servicing Center, unless they enroll in the Electronic Debit Account (EDA).

    Borrowers receive a 0.25 percent discount on their interest rate for as long as they continue to make payments using EDA.

    Borrowers must keep the Direct Loan Servicing Center informed of changes of address and to their names. Borrowers are responsible for making payments on time regardless of whether they receive billing statements. Borrowers should send payments to:

    U.S. Department of Education
    Direct Loan Payment Center
    P.O. Box 530260
    Atlanta, GA 30353-0260

  • Can I prepay on my loan?

    Borrowers may prepay all or part of the unpaid balance on any Direct Loan at any time, without an early repayment penalty. If a borrower makes a payment that exceeds the required monthly payment, the prepayment will be applied first to any charges or collection costs, then to outstanding interest, and last to principal. However, if a borrower’s account has no outstanding interest, the prepayment is applied entirely to principal. If the prepayment is twice the borrower’s monthly payment, the next payment due date is advanced unless the borrower specifies otherwise. The borrower will be notified of a revised due date.

  • How does Total Education Indebtedness effect the repayment term of my Direct Consolidation Loan?

    If you elect to repay your Direct Consolidation Loan under either the Standard or Graduated Repayment Plans, your repayment term is determined based on your consolidation loan amount and other eligible education loans that are not part of your Direct Consolidation Loan as long as you provided information about those loans on your application. Here are examples of how Total Education Indebtedness effects the repayment term for your Direct Consolidation Loan.

    Your Existing Loans:

    Loan A $ 2,500
    Loan B $ 6,000
    Loan C $ 2,500
    Loan D $ 7,500
    Loan E $ 7,500
    Loan F $13,000
    Total Outstanding Amount $39,000

    Examples 1 and 2 assume that you reported all your outstanding education loans on your consolidation application.

    You Consolidate Your Direct Consolidation Loan Amount Your Other Eligible Education Loans Your Total Education Indebtedness Your Direct Consolidation Loan Repayment Term (approx.)
    Example 1
    Loans A and B $8,500 $30,500 $17,000 15 Years
    Example 2
    Loans A, B, C, D, and E $26,000 $13,000 $39,000 20 Years

    In Example 1 you consolidated less that one-half of your eligible outstanding loans. As a result, we base your repayment term on your Direct Consolidation Loan amount plus other eligible indebtedness only in an amount equal to your new Direct Consolidation Loan:

    Direct Consolidation Loan ($8,500) + Other Eligible Education Loan Allowance ($8,500)
    = Total Indebtedness ($17,000)

    In Example 2 you consolidated more than one-half of your eligible outstanding loans so the calculation of Total Education Indebtedness includes all of your other eligible education loans. The result is a longer repayment term than in Example 1.

    Direct Consolidation Loan ($26,000) + Other Eligible Education Loan Allowance
    ($13,000) = Total Education Indebtedness ($39,000)

    Finally, Example 3 illustrates the impact on your repayment term if you did not report all of your outstanding education loans on your Direct Consolidation Loan application. Your repayment plan term is shorter than in Example 1.

    You Consolidate Your Direct Consolidation Loan Amount Your Other Eligible Education Loans Your Total Education Indebtedness Your Direct Consolidation Loan Repayment Term (approx.)
    Example 3
    Loans A and B $8,500 $0 $8,500 11 Years

    Remember that the longer your repayment term the lower your monthly payment will be. However, this usually means that the total interest paid during repayment will be higher. Only you can decide what plan is best for you. And, you can change plans later if your plan no longer suits your needs. Use our convenient online calculator to estimate your number of monthly payments, monthly payment amounts and total interest to be paid for as many different scenarios as you like.