Federal Student Aid - IFAP
   
CONSOLIDATION AFTER GRADUATION

The Federal Direct Consolidation Loan
Program enables borrowers to combine various
types of federal education loans, to extend the
period of repayment, to obtain a lower interest
rate in some cases, and to simplify repayment by
eliminating the need to deal with multiple
lenders.

The Basics

Borrowers must consolidate at least one
Direct Loan or Federal Family Education Loan
(FFEL) in a Direct Consolidation Loan. They
may also include other student loans, such as
Federal Perkins Loans and Title VII Health
Professions Student Loans.

Borrowers who do not have a Direct Loan
may consolidate an FFEL under the Direct
Consolidation Loan Program only if they are
unable to obtain a Federal Consolidation Loan or
if they are eligible for the Income Contingent
Repayment Plan under the Direct Loan Program
and are unable to obtain a Federal Consolidation
Loan with income-sensitive repayment terms
acceptable to them.

Loans that are made by a state or private
lender and are not guaranteed by the federal
government cannot be consolidated.

Borrowers are not required to combine all
of their federal education loans. The interest rate
on some loans may be lower than that offered
through a Direct Consolidation Loan. The
interest rate on Direct Consolidation Loans is
variable with an 8.25 percent cap for student
loans.

The Advantages

There is no minimum or maximum
consolidation amount. And there is no
consolidation fee.

Borrowers send one payment to one place.
They make only one request to update their
address or to apply for a deferment.

Varied deferment options are available on a
Direct Consolidation Loan. Borrowers may be
eligible for additional deferment options if they
include an FFEL borrowed before July 1, 1993,
in the consolidation loan.

Four repayment plans are available,
including Income Contingent Repayment in
which monthly payments reflect a borrower's
ability to pay.

Answers to Common Questions

Can borrowers consolidate a loan that is in
deferment? Yes, but they will need to reapply for
the deferment once the loan has been
consolidated.

Can borrowers consolidate loans while in
their grace period? Yes, but they should be
encouraged to wait until the last month of grace.
Unless one of the loans a borrower is
consolidating is in an "in-school" period,
payments on a Direct Consolidation Loan begin
within 60 days of the first disbursement.

The Loan Origination Center will be glad to
answer any other questions. Please call:
1-800-848-0979 (after cutover, 1-800-557-7392).
Or write: Loan Origination Center
P.O. Box 4272
Montgomery, AL 36104