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(Loans) Subject: Special Direct Consolidation Loan Information - Direct Loan Servicing Center (ACS) Borrower Contact Will Begin On/About March 5, 2012

Posted Date:March 2, 2012

Author: William Leith, Service Director, Program Management, Federal Student Aid

Subject: Special Direct Consolidation Loan Information - Direct Loan Servicing Center (ACS) Borrower Contact Will Begin On/About March 5, 2012

As we communicated in a February 27, 2012 Electronic Announcement on the Information for Financial Aid Professionals (IFAP) Web site, we are ready for FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae to begin the second phase of borrower contact for the Special Direct Consolidation Loan opportunity. In the second phase, the four servicers will contact potentially eligible borrowers whose federal loan servicer is the Direct Loan Servicing Center (ACS) and communicate with them about the availability of this special initiative.

The Special Direct Consolidation Loan initiative is a short-term consolidation opportunity the Department of Education (the Department) is offering 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. The application period began on January 17, 2012 and will continue through June 30, 2012.

Beginning on or about March 5, 2012, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae will contact potentially eligible borrowers who have at least one Direct Loan that is currently being serviced by the Direct Loan Servicing Center (ACS) and at least one commercially-held FFEL loan that is currently being serviced by a FFEL lender or lender servicer. The Special Direct Consolidation Loan opportunity will allow these borrowers to consolidate their commercially-held FFEL loans into a Special Direct Consolidation Loan and then have that consolidation loan and the borrower's Direct Loans serviced by one federal loan servicer.

For a borrower who is eligible for the Special Direct Consolidation Loan opportunity and whose federal loan servicer is the Direct Loan Servicing Center (ACS), the end result will be for the borrower to have one federal loan servicer responsible for the servicing of the borrower's new Special Direct Consolidation Loan and existing Direct Loans. To achieve that end result, the borrower's existing Direct Loans will be transferred to the Special Direct Consolidation Loan servicer after the consolidation has been completed. Our goal is to make the process as seamless and smooth as possible for the borrower. The process will flow as follows:

  • We will assign each potentially eligible borrower to FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae.

  • FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae will contact the borrower about the Special Direct Consolidation Loan opportunity using a variety of methods that include phone calls and correspondence that is mailed via the U.S. Postal Service and/or e-mailed to the borrower's e-mail addresses on file with us. The servicer will communicate with and direct the potentially eligible borrower to the Special Direct Consolidation Loan online application.

  • Note: We understand that some borrowers may be confused when contacted by a federal loan servicer other than the Direct Loan Servicing Center (ACS). If school personnel or other members of the community become aware of such confusion, we appreciate their assistance in reassuring borrowers that FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae is acting on behalf of the Department in furtherance of the relationship that exists between the Department and an individual borrower and encouraging those borrowers to consider the Special Direct Consolidation Loan opportunity.

  • After the borrower completes and submits the Special Direct Consolidation Loan online application, FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae will verify the eligibility and payoff amount of each commercially-held FFEL loan the borrower wishes to consolidate. After the Department pays off the underlying loans, the servicer will begin to service the borrower's Special Direct Consolidation Loan.

  • Once the borrower's Special Direct Consolidation Loan is being serviced by FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae, the Department will transfer the borrower's Direct Loans from the Direct Loan Servicing Center (ACS) to the Special Direct Consolidation Loan servicer. Upon completion of the transfer, all of the borrower's federally-owned loans (Special Direct Consolidation Loan and other Direct Loans) will be serviced by the Special Direct Consolidation Loan servicer going forward.

When it is time to transfer a Special Direct Consolidation Loan recipient's Direct Loans from the Direct Loan Servicing Center (ACS) to the Special Direct Consolidation Loan servicer – FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, or Sallie Mae, we will execute the transfer through the process we have established for addressing other situations in which a borrower has more than one federal loan servicer. In the attachment to this announcement titled "Direct Loan Transfers – Direct Loan Servicing Center (ACS) to Special Direct Consolidation Loan Servicer," we provide key information about the transfer process in question and answer format.

Further Information

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).

General borrower information continues to be available on our Special Direct Consolidation Loans Web page.

Last Modified: 03/01/2012