Posted Date:February 27, 2012
| Author: | William Leith, Service Director, Program Management, Federal Student Aid |
Subject: Special Direct Consolidation Loan Information - Reminders and Updates
The application period for the Special Direct Consolidation Loan opportunity that began on January 17, 2012 is well underway and will continue through June 30, 2012. As explained in previous communications, the Department of Education (the Department) is offering this short-term consolidation opportunity through the William D. Ford Federal Direct Loan (Direct Loan) Program. The initiative allows certain borrowers who have at least one Direct Loan Program loan or Department-held Federal Family Education Loan (FFEL) Program loan and at least one commercially-held FFEL Program loan to consolidate their eligible commercially-held FFEL Program loans into a Special Direct Consolidation Loan.
At this time, we want to share some reminders and updates related to the Special Direct Consolidation Loan opportunity.
Contact by Four Servicers – FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae are the only four federal loan servicers that will contact borrowers about the Special Direct Consolidation Loan opportunity offered by the Department. The four servicers will contact potentially eligible borrowers assigned to them through a variety of methods that include phone calls, Web site messaging, and correspondence that is mailed via the U.S. Postal Service and/or e-mailed to the borrowers’ e-mail addresses on file with the servicer.
Reminder: Our federal loan servicers have e-mail addresses and Web site URLs that use the “.com” or “.org” domain (as opposed to the “.gov” domain). Borrowers will see and be referred to these e-mail addresses and URLs in the Special Direct Consolidation Loan correspondence they receive from the servicers. If a borrower is uncertain about the legitimacy of an e-mail address or URL, the borrower should be encouraged to look for one of the four servicer names within the e-mail address or URL.
Phase One Borrower Contact – Since January 17, 2012, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae have been in contact with potentially eligible borrowers whose federal loan servicer is FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae. The four servicers are communicating with these borrowers and directing them to the Special Direct Consolidation Loan online application.
Phase Two Borrower Contact – In March 2012, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae will begin to contact potentially eligible borrowers whose federal loan servicer is the Direct Loan Servicing Center (ACS). Before the four servicers begin communicating with these borrowers and directing them to the Special Direct Consolidation Loan online application, we will post an Electronic Announcement that provides more information about this second phase of borrower contact. Monitor the Information for Financial Aid Professionals (IFAP) Web site for the forthcoming Electronic Announcement.
Special Direct Consolidation Loan Information – Potentially eligible borrowers will receive information about the Special Direct Consolidation Loan opportunity from FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae. Prior to contact by one of the four servicers, a borrower can access general Special Direct Consolidation Loan information on the Special Direct Consolidation Loans Web page.
We recently updated the Special Direct Consolidation Loans Web page. In addition to expanding the content, we separated the information into the following three sections:
- Eligibility Requirements, Benefits, and Repayment
- Notification of Potential Eligibility
- Online Application Process
We invite the financial aid community to review the updated Special Direct Consolidation Loans Web page. As a reminder, the page is available in both English and Spanish.
- Special Direct Consolidation Loan Online Application Process – We recently implemented improvements to the Special Direct Consolidation Loan online application process. The improvements, which focused on the presentation and explanation of pre-filled loan information items, are assisting borrowers with completion and submission of the online application. In addition, we added a Special Direct Consolidation Loan Online Application Process page that a borrower can access before beginning the online application.
Reminder: The online application for the Special Direct Consolidation Loan opportunity is located within the StudentLoans.gov Web site. After being directed to the online application by FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae, a borrower will log in to the Web site using his or her Federal Student Aid PIN and then click on the word “here” in an Alert message located on the top right side of the page to begin the online application process. Some potentially eligible borrowers may see the Alert message before they are contacted by a servicer. If this occurs, the borrower may proceed with the online application process.
Special Direct Consolidation Loan Online Application Submission and Next Steps – After a borrower submits an application through the online Special Direct Consolidation Loan process, the borrower will be presented with confirmation of the submission and contact information for the Department’s servicer to which the application will be transmitted. Borrowers who provide e-mail addresses during the application process will also receive e-mails after application submission and transmission occur.
It is important to assist borrowers in understanding that the consolidation will not be complete as soon as the Special Direct Consolidation Loan application is submitted by the borrower and transmitted to the servicer. Until the commercially-held FFEL loans that the borrower wishes to consolidate have been verified as eligible and paid off, the borrower will continue to receive statements and bills from the FFEL Program lenders or lender servicers of those loans. Servicing of the Special Direct Consolidation Loan by the federal loan servicer handling the consolidation will begin after the Department pays off the underlying loans.
Special Direct Consolidation Loan Application Cancellation – A borrower may cancel a pending Special Direct Consolidation Loan application up to the point when the first commercially-held FFEL loan the borrower wishes to consolidate has been paid off by the Department. However, once the first loan has been paid off, the application cannot be cancelled.
To request cancellation of a pending Special Direct Consolidation Loan application, a borrower must communicate with the servicer that is handling the borrower’s consolidation. The servicer will let the borrower know if it is still possible to cancel the application. When making this determination, the servicer will evaluate whether the funding activities for the first loan payoff have yet begun.
Note: Some borrowers may have a traditional Direct Consolidation Loan application in process when they decide to obtain a Special Direct Consolidation Loan. In some cases, a borrower may cancel a pending traditional Direct Consolidation Loan application. However, once the borrower has received the loan statement and the specified 15-day adjustment period has ended, the application cannot be cancelled. The guidelines that apply to canceling a traditional Direct Consolidation Loan application are summarized on the Special Direct Consolidation Loans Web page.
We will continue to keep the community informed through subsequent “Special Direct Consolidation Loan Information” Electronic Announcements on the IFAP Web site (and on the Financial Partners Portal Web site when applicable). In particular, we will inform the community when we are ready to begin contacting potentially eligible borrowers whose federal loan servicer is the Direct Loan Servicing Center (ACS).
As highlighted above, borrower information continues to be available on our Special Direct Consolidation Loans Web page.