Posted Date: June 08, 2009
Author: James F. Manning, Acting Chief Operating Officer
Subject: Lender options for determining Federal Consolidation Loan interest rates as of July 1, 2009.
Federal Consolidation Loans in the FFEL Program have fixed interest rates that are based on the weighted average of the interest rates of the loans being consolidated. Many of the loans that borrowers may wish to consolidate over the next several weeks have variable interest rates that will decrease significantly on July 1, 2009. To help borrowers obtain the lowest statutory weighted average interest rate on their consolidation loans, the Department is encouraging lenders to delay the funding of consolidation loans for applications received prior to July 1 until after July 1 so that borrowers can benefit from the lower interest rates that will be in effect on July 1.
A lender choosing to delay funding must notify the borrower that the lender is holding the consolidation loan application and the reason for the delay. The lender must proceed prior to July 1 if a borrower so requests.