| PublicationDate: 9/19/97 Summary: ED Assistance for Federal Direct Loan Consolidation Author: ODAS - Office of the Deputy Assistant Secretary - SFA September 19, 1997 Dear Colleague: The purpose of this message is to provide you with additional information concerning actions we are taking to assist applicants for Federal Direct Consolidation Loans during our current processing delay. 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 prior 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 be sent 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 a consolidation loan from the FFEL Program by contacting one of their FFEL loan holders. The letter includes a fact sheet that describes the differences between the Direct Loan and FFEL consolidation programs. 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 appropriate. If your school participates in the Federal Perkins Loan Program or the Health Professions Loan Program, we ask that you inform your collections staffs that they should approve a request for a deferment, a forbearance, or for other relief, as appropriate. We are also informing Guaranty Agencies and FFEL lenders that they should grant a forbearance request to any borrower who indicates that they are waiting, but unable, to consolidate into the Federal Direct Consolidation Loan Program. Borrowers who have one or more Federal Direct Loans that are awaiting consolidation may also request a deferment or forbearance from the Direct Loan Servicing Center. 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. I will continue to keep you updated as to our progress. Sincerely, Elizabeth M. Hicks Deputy Assistant Secretary Student Financial Assistance Programs |