Students are now able to consolidate their Direct
Loans or Federal Family Education Loans (FFELs)
while in school. However, because some schools
report their students as "not enrolled" for the
summer, the Department of Education is urging
schools to wait until this fall to start the process.
To be eligible for in-school consolidation, students
attending a Direct Loan school must have at least
one Direct Loan or FFEL that is in an "in-school"
period. Students attending schools that do not
participate in the Direct Loan program must have a
Direct Loan, and they must consolidate one Direct
Loan or FFEL in an "in-school" period.
Advantages to Students
- One request to apply for deferment or change
student status or address.
- Possible interest rate reduction. Effective July 1,
1995, the formula for calculating interest assessed
on all new unsubsidized Direct Loans or FFELs
during in-school, grace, and deferment periods is
the 91-day Treasury bill rate plus 2.5 percentage
- No consolidation fee.
- No minimum or maximum loan amounts.
The following loans cannot be consolidated
while students are in-school; however, they may be
consolidated after graduation.
- Federal Perkins Loans
- National Direct Student Loans
- National Defense Student Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Nursing Student Loans
- Loans for Disadvantaged Students
Advice for Counselors
- Borrowers receive a grace period on a Direct
Consolidation Loan if that loan includes one Direct
Loan or FFEL in an in-school period at the time of
- Borrowers whose loans are in a grace period
should be encouraged to wait until the last two
months of that grace period to apply for
consolidation. Repayment on regular consolidation
loans begins within 60 days of the first
disbursement and, thus, could cut short the grace
period of a borrower who applied too early.