Posted Date: May 14, 2009

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

Subject: Direct Consolidation Loan Processing Information

We take this opportunity to inform schools of Federal Direct Consolidation Loan (Direct Consolidation Loan) processing information that may be helpful when providing consolidation guidance to borrowers who ask about consolidating their loans after they leave school. It is important for borrowers to be aware of this information before applying for a Direct Consolidation Loan during the grace period on the loans they wish to consolidate.

As a result of recently implemented improvements to the Direct Consolidation Loan process, an applicant may now delay the consolidation of any loans that are in the grace period by indicating the grace period end date on the Federal Direct Consolidation Loan Application and Promissory Note (the Direct Consolidation Loan application). If an applicant provides this information, we will delay the processing of the Direct Consolidation Loan application until shortly before the grace period end date.

Delaying the processing of a Direct Consolidation Loan application until shortly before the end of the grace period allows the applicant to initiate the consolidation process but not have it completed until he or she has benefited from the full grace period during which payments are not required.

The following are some key points related to delaying the processing of a Direct Consolidation Loan application until shortly before an applicant's grace period ends:

• Information about Direct Consolidation Loans and the application process is available on the Direct Consolidation Loans Web site. An applicant may apply online or download the application for paper submission.
  
  
• If an applicant wants us to delay the processing of a Direct Consolidation Loan application, he or she must complete the Grace Period End Date item in the application. This item is #17 of Section C1. To delay processing, the applicant must enter the month and year that his or her grace period is expected to end.
  
  
• If an applicant enters an expected grace period end date in item #17 of the Direct Consolidation Loan application, we will delay the processing of the application until 45 days prior to the end of the month the applicant enters.
  
  
• If an applicant enters an expected grace period end date in item #17 of the Direct Consolidation Loan application, we do not send the applicant any special correspondence confirming that the processing of the application will be delayed.
  
  
• If an applicant does not enter an expected grace period end date in item #17 of the Direct Consolidation Loan application, we will begin the processing of the application upon its receipt. This means that any loans that are in the grace period will enter repayment immediately upon consolidation.

Contact Information

If you have questions about the information provided in this announcement or about Direct Consolidation Loans in general, contact the Direct Loan Consolidation Center at 800/557-7392.