Posted Date: January 18, 2012

Author:  William Leith, Service Director, Program Management, Federal Student Aid

Subject: Special Direct Consolidation Loan Information — Federal Loan Servicer Contact Underway

We are pleased to announce the start of the application period for the Special Direct Consolidation Loan opportunity the Department of Education (the Department) will offer to eligible borrowers through the William D. Ford Federal Direct Loan (Direct Loan) Program. On January 17, 2012, we implemented the online application for this short-term special consolidation opportunity that will be available to eligible borrowers through June 30, 2012.

FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae have begun contacting potentially eligible borrowers and directing them to the online application. We remind the community that these are the only four federal loan servicers that will contact borrowers about the Special Direct Consolidation Loan opportunity offered by the Department. If an entity other than FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae contacts borrowers about “special consolidation,” it will not be in reference to the Special Direct Consolidation Loan opportunity that is being offered by the Department through June 30, 2012.

As we communicated most recently in our January 13, 2012 Electronic Announcement on the Information for Financial Aid Professionals (IFAP) Web site, we have a plan in place for contacting all potentially eligible borrowers about the Special Direct Consolidation Loan opportunity. It will take time for our four federal loan servicers to make these contacts, but they will do so as efficiently and expeditiously as possible.

At this time, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae have begun the first phase of contact with potentially eligible borrowers. In this phase, the servicers are reaching out to borrowers who currently have FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae as their federal loan servicer.

As contact with potentially eligible borrowers begins, we highlight the following important information:

  • Special Direct Consolidation Loan Servicer Correspondence – For the most part, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae will communicate with the potentially eligible borrowers assigned to them through correspondence that is mailed via the U.S. Postal Service and/or e-mailed to the borrowers’ e-mail addresses on file with the servicer.

  • Reminder: Our federal loan servicers have e-mail addresses and Web site URLs that use the “.com” or “.org” domain (as opposed to the “.gov” domain). Borrowers will see and be referred to these e-mail addresses and URLs in the Special Direct Consolidation Loan correspondence they receive from the servicers. If a borrower is uncertain about the legitimacy of an e-mail address or URL, the borrower should be encouraged to check the servicer name within the e-mail address or URL. The servicer name should be FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae.

  • Special Direct Consolidation Loan Servicer Point of Contact – After a potentially eligible borrower has been contacted byFedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae, that servicer will become the borrower’s primary point of contact for questions and information related to the Special Direct Consolidation Loan opportunity. Each communication the borrower receives from the servicer will include the servicer’s contact information.
  • Note: As explained in the “Special Direct Consolidation Loan Online Application Process” section of this announcement, a borrower will be able to request assistance when completing the online application. However, online application assistance will not be provided by the federal loan servicer. See below for information about how borrowers will obtain online application assistance.

  • Special Direct Consolidation Loan Online Application Process – In the correspondence from FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae, the servicer will explain the steps a potentially eligible borrower must complete to apply for a Special Direct Consolidation Loan. In addition, the servicer will provide the URL for the borrower to use to access and complete the online application.
  • As reiterated many times in our series of communications about the Special Direct Consolidation Loan opportunity, a potentially eligible borrower must apply through the online process. The online application for the Special Direct Consolidation Loan opportunity is housed within the StudentLoans.gov Web site. The borrower will need to enter his or her Federal Student Aid PIN to access the online application.

    While the preferred approach is for borrowers to receive explanatory materials and the online application URL first from FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae, some potentially eligible borrowers may see a Special Direct Consolidation Loan Alert if they log in to the StudentLoans.gov Web site before they receive the servicer correspondence. If the Special Direct Consolidation Loan Alert is present in the Alerts box when a borrower logs in to StudentLoans.gov prior to servicer contact, the borrower may proceed with the online application process if he or she wants to apply for a Special Direct Consolidation Loan and is ready to do so. In this case, the completed application will be forwarded to the borrower’s assigned servicer.

    The online application process will first walk a borrower through the completion of borrower, reference, eligible loan, and ineligible loan information sections. Much of the information in those sections will be pre-populated for the borrower’s review and confirmation. Next, the borrower will be presented with promissory note terms and borrower’s rights and responsibilities information, including the Addendum to the Federal Direct Consolidation Loan Application and Promissory Note for Special Direct Consolidation Loans. The addendum explains the differences between the terms, rights, and responsibilities of a traditional Direct Consolidation Loan and a Special Direct Consolidation Loan. Finally, the borrower will complete acknowledgments and agreements, including selection of a repayment plan.

    Assistance will be available to borrowers who complete the online application. To obtain assistance, the borrower simply needs to click on Contact Us on the top menu bar of the StudentLoans.gov Web site.

    After a borrower completes and submits the online application, a screen will appear to confirm the borrower’s submission and provide the name and contact information for the servicer to which the borrower’s application will be transmitted. If the borrower includes an e-mail address during the application process, the borrower will receive an e-mail that includes the same submission confirmation information. Once the borrower’s application has been transmitted to the servicer, the borrower will receive a second e-mail confirming that transmission and again providing the servicer’s contact information.

    To assist the financial aid community in understanding the online application that potentially eligible borrowers will complete, we have created a set of screenshots that illustrates the application process from start to finish. We provide the screenshots in the attachment to this announcement titled “Online Application Process for Special Direct Consolidation Loans” as an informational resource for members of the financial aid community. The screenshots may not be used to apply for a Special Direct Consolidation Loan.

    Special Direct Consolidation Loan Post-Application Steps – After receiving a borrower’s completed application, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae will contact the Federal Family Education Loan (FFEL) Program lenders or lender servicers that hold the borrower’s commercially-held FFEL loans to verify the eligibility and payoff amounts of the commercially-held FFEL loans the borrower wishes to include in the Special Direct Consolidation Loan. Following this verification process, the FFEL lenders will receive payoff funding from the Department and the Special Direct Consolidation Loan will begin to be serviced by the federal loan servicer. The National Student Loan Data System will also be updated to reflect the status of the commercially-held FFEL loans paid through consolidation and the new Special Direct Consolidation Loan.

Further Information

As we progress through the application period, we will continue to keep the community informed through subsequent “Special Direct Consolidation Loan Information” Electronic Announcements on the IFAP Web site (and on the Financial Partners Portal Web site when applicable). In particular, we will inform the community when we are ready to begin contacting potentially eligible borrowers who currently have the Direct Loan Servicing Center (ACS) as their federal loan servicer.

General eligibility information for borrowers continues to be available on our Special Direct Consolidation Loans Web page.

Attachments/Enclosures:

Online Application Process for Special Direct Consolidation Loans in PDF Format, 2 MB, 20 Pages

   

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