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ED Assistance for Federal Direct Loan Consolidation

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.


Elizabeth M. Hicks
Deputy Assistant Secretary
Student Financial Assistance Programs

Last Modified: 08/16/1999