Federal Student Aid - IFAP
DCLPublicationDate: 6/1/2000
Summary: The Opportunity for Borrowers to Consolidate Before the July 1, 2000 Interest Rate Increase Has Been Expanded!!

June 7, 2000


Dear Partner:

The Opportunity for Borrowers to Consolidate Before the July 1, 2000 Interest Rate Increase Has Been Expanded !!

Borrowers Could SAVE By Consolidating College Loans Prior to July 1, 2000

Students who move quickly may be able to save money by consolidating college loans before new, and most likely higher, interest rates become effective July 1, 2000. Student loan interest rates are adjusted annually on July 1 according to a formula based on the interest rates of the 91-day Treasury bills. Since last year, the Federal Reserve has increased the short-term lending rate by nearly 1.25 percentage points. This means that borrowers who consolidate after July 1, 2000 could see their Stafford loan rates rise from current rates, to a rate approaching the 8.25% cap. Rates on PLUS loans for parents with dependent undergraduates could rise to the 9% cap.

Applications Postmarked Before July 1, 2000 Receive the Current Low Interest Rate
In order to provide borrowers with the maximum time before July 1, 2000 to take advantage of the current lower interest rates, the underlying loans of a Direct Consolidation request will be based on the:

postmark date for paper applications
electronic receipt date for web applications
date of telephone call for Express applications (Direct Loans only)

Until now, the interest rate on the underlying loans of a Direct Consolidation request was determined on the basis of the date the loan holder(s) certified the loan. This meant that if the loan certification process was delayed for any reason, borrowers applying close to July 1, 2000 might not receive the lower interest rate on all, or a portion, of the underlying loans making up their consolidation.

Both FFEL Consolidation and Direct Consolidation Programs Can Participate
Certifying the interest rate by the application postmark date or the electronic receipt date prior to July 1, 2000 are options being made available to BOTH the FFEL and Direct Loan consolidation programs. Direct Consolidation will accept the postmark date or the electronic receipt date for all applications received before July 1, 2000.

After July 1, 2000 The Application Receipt Date Will Be Used
After the July 1, 2000 interest rate adjustments Direct Consolidation (optional for FFEL consolidation programs) will adopt permanent use of the application receipt date as the basis for determining the interest rate on all underlying loans included in a consolidation.

Impact On In-School and In Grace Consolidations
In Grace – Borrowers who consolidate during their grace period will have the interest rate on their underlying loans based on the application receipt date (postmark date before July 1, 2000), thus allowing borrowers to take full advantage of their grace period.

In-School – The current practice to base an in-school borrower's interest rate on the application
receipt date will continue. However, the postmark date will be used for applications received
prior to July 1, 2000.

Other Benefits of Consolidation
Additional benefits of consolidation include eliminating the inconvenience of having several loans with multiple lenders, having loan payments based on income, and repayment plans that extend the repayment period.

How Can Borrowers Apply?
Remember: all applications must be postmarked, or received before July 1, 2000. Borrowers can apply in one of three ways:

1). Apply on-line or download an application:

2). Express Application – For borrowers consolidating Direct Loans only, call 1-888-758-9730.

3) Paper Application: Request a paper application be mailed to you by. Telephone or e-mail:

E-mail loan_consolidation@mail.eds.com

Phone 1-800-557-7392 (1-800-557-7395 TDD for the hearing impaired)
8AM to 8PM (EST), Monday through Friday

Please contact us if you have any questions using one of the above resources.


Denise Leifeste
Direct Consolidation Loans