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ED Assistance for Applicants for Federal Direct Consolidation Loans

PublicationDate: 9/26/97
Summary: ED Assistance for Applicants for Federal Direct Consolidation Loans
Author: DLTF - Direct Loan Task Force

Posted September 29, 1997

ED Assistance for Applicants for Federal Direct Consolidation Loans

In a BBS message also posted to FINAID-L September 19, 1997, ED described the
steps it is taking to assist applicants for Federal Direct Consolidation Loans. Attached
is the letter that ED has sent to Guaranty Agencies and FFEL lenders informing them
that they should grant forbearance or deferment, as appropriate, to assist borrowers
who are waiting, but, unable to consolidate into the Federal Direct Consolidation Loan
Program. Please take a moment to read this letter.

Dear Guaranty Agency Director and FFELP Lender:

The purpose of this letter is to ask your assistance in helping applicants for Federal
Direct Consolidation Loans whose loans have not yet been consolidated because of
our temporary processing delays. Borrowers for whom we are currently processing a
Federal Direct Consolidation Loan application will receive a letter explaining our
current processing status and reminding them to respond to our previous requests for
information as soon as possible. Those borrowers who submit an application after
September 1, 1997, as well as those who call asking for an application,will receive a
letter explaining the current status of our processing and offering them possible
alternatives to Direct Loan consolidation. One of these alternatives is for borrowers
to request an FFELP consolidation loan by contacting one of their FFELP loan
holders. The letter includes a fact sheet that describes the differences between the
Direct Loan and FFELP consolidation programs. We ask that you assist these
borrowers should they contact you regarding the possibility of consolidating their
loans into the FFEL Program.

The Federal Direct Consolidation Loan Application packet includes a statement
reminding borrowers to keep current on their loan payments while they are awaiting
consolidation. The status letters discussed above reiterate that message to borrowers,
telling them that, until their loans have been consolidated, either through Direct Loans
or FFEL, they must remain current on their scheduled loan payments. While we
expect that we will quickly be able to complete the processing of all the applications
we currently have and be able to accept new applications shortly thereafter, we
understand that even a short delay may mean that some borrowers may have difficulty
keeping current on their payments. Therefore, the letters remind borrowers that, if
they feel that they can not remain current by making scheduled loan payments, they
should request that their loan holder grant them a deferment or forbearance, as

This letter authorizes FFELP lenders to grant an administrative forbearance to
borrowers who contact them, in writing, by phone or in person, and state that they are
experiencing a hardship because they are waiting, but unable, to consolidate their
loan(s) into the Federal Direct Consolidation Loan Program. For delinquent
borrowers, the forbearance can be granted retroactive to the beginning of the
delinquency period. The end date of this specific forbearance is the date the loan is
consolidated. The borrower's written or phone request, noted by the lender in the
borrower's file or record, will serve as sufficient documentation for granting the
administrative forbearance.

Last Modified: 08/16/1999