Posted Date: May 20, 2014

Author:  Sue O'Flaherty, Service Director, Program Management, Federal Student Aid

Subject: New Direct Consolidation Loan Process Information - Phase Two of Transition Implemented on May 18, 2014

On May 18, 2014, we implemented the second phase in bringing closure to the former loan consolidation system and transitioning to the new Direct Consolidation Loan process.  As explained previously (January 7, 2014 and November 27, 2013), we are making these changes in preparation for the end to our contract with ACS (Xerox).

In the second phase of the transition, all new applicants will use the new Direct Consolidation Loan process on StudentLoans.gov.  We will not allow new applications to be submitted through the Direct Consolidation Loans Web site or sent to the Direct Loan Consolidation Center going forward; however, we will continue to work with applicants whose applications were submitted in one of these ways and that we began to process before May 18, 2014.  Once we finish processing the applications in this queue, we will shut down the former consolidation system.

We present the information in this announcement as follows:

  • Direct Consolidation Loan Process for All New Applicants Effective May 18, 2014

  • Applications Received through Former Consolidation System Before May 18, 2014

  • Loan Holder and Servicer Information

  • Contact Information

Direct Consolidation Loan Process for All New Applicants Effective May 18, 2014

Effective May 18, 2014, all new Direct Consolidation Loan applicants will complete and submit the Federal Direct Consolidation Loan Application and Promissory Note through one process on StudentLoans.gov.  We will refer to the Federal Direct Consolidation Loan Application and Promissory Note as the “application” throughout the rest of this announcement.

The StudentLoans.gov Web site is available at www.studentloans.gov.  A Direct Consolidation Loan applicant will sign in to StudentLoans.gov using his or her personal identifiers and Federal Student Aid PIN to electronically complete the application.

Note: Although we strongly encourage electronic completion of the application, an applicant will be able to download and print a paper application from StudentLoans.gov for submission by U.S. mail.

As previously explained (January 7, 2014), the electronic application on StudentLoans.gov consists of five steps: 1 – Choose Loans & Servicer, 2 – Repayment Plan Selection, 3 – Terms & Conditions, 4 – Borrower & Reference Information, and 5 – Review & Sign.  Through the five-step process, the applicant will have the following opportunities:

  • The applicant will be able to add loans to and/or remove loans from the information obtained from the National Student Loan Data System (NSLDS) and populated in the application.

  • If the applicant has at least one loan that is still in the grace period and wants to consolidate that loan, the applicant will be able to have the processing of his or her application delayed until close to the end of the grace period.

  • The applicant will choose the federal loan servicer that he or she wants to complete the consolidation.  We have four consolidation servicers—FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae—from which an applicant may choose.

  • The applicant will select the repayment plan under which he or she wants to repay the Direct Consolidation Loan.  When making this selection, if the applicant is interested in one of the “income-driven” repayment plans, he or she will be able to complete the Electronic Income-Based Repayment (IBR)/Pay As You Earn/Income-Contingent Repayment (ICR) Plan Request as part of the Direct Consolidation Loan process.

Note: An applicant who is logged in to StudentLoans.gov and completing the electronic application may request technical assistance by clicking on the Contact Us tab in the top menu bar of StudentLoans.gov.  The applicant can 1) complete and submit the feedback form or 2) click on Additional Information and contact the Student Loan Support Center at the phone number provided.

After an applicant submits his or her application electronically via StudentLoans.gov or by mailing a paper application, the consolidation servicer will complete the actions required to consolidate the applicant’s eligible loans.  The consolidation servicer will be the applicant’s point of contact for questions related to his or her consolidation application.

Applications Received through Former Consolidation System Before May 18, 2014

Effective May 18, 2014, we will not allow new applications to be submitted through the Direct Consolidation Loans Web site or sent to the Direct Loan Consolidation Center.  We will, however, continue to work with applicants whose applications were submitted in one of these ways and that we began to process before May 18, 2014.

The Direct Consolidation Loans Web site will continue to be available until we are ready to shut down completely; however, we are in the process of disabling links and functions on the site that are no longer applicable.  Messaging on the site will explain that applicants and loan holders that need to take action on an application submitted prior to May 18, 2014 will be able to do so.  The Direct Loan Consolidation Center also will remain operational to assist those applicants and loan holders.

In addition to the Direct Consolidation Loans Web site messaging, we will send letters to applicants whose applications will not be processed and who will need to go to StudentLoans.gov to initiate a new application.  Affected applicants’ applications fall into one of the following categories:

  • The application was in a saved status online as of May 18, 2014.

  • The application had been submitted, but we had not yet begun processing it prior to May 18, 2014.

  • The application had been submitted with a request to delay processing until close to the end of the grace period, and we had not yet begun processing it prior to May 18, 2014.

  • The paper application was received on or after May 18, 2014.

We will inform the community when we are finished processing all applications received prior to May 18, 2014.

Loan Holder and Servicer Information

Loan holders and servicers include 1) Federal Family Education Loan (FFEL) Program lenders and lender servicers and 2) schools and third party servicers that verify and/or receive payoffs for Federal Perkins Loans and eligible health professions loans.  The two announcements that provide loan holders and servicers with guidance on the new Direct Consolidation Loan process are as follows:

  • February 28, 2014 – In this announcement, we provide guidance on what is expected and required of FFEL Program lenders and lender servicers in the new Direct Consolidation Loan process.  Also included in the audience for this communication are FFEL Program guaranty agencies that service defaulted FFEL Program loans selected for consolidation.

  • March 21, 2014 – In this announcement, we provide guidance on what is expected and required of schools and third party servicers that verify and/or receive payoffs for Federal Perkins Loans and eligible health professions loans in the new Direct Consolidation Loan process.  The guidance in this announcement applies to schools that service loans and schools that use a third party servicer to service loans.  Also included in the audience for this communication are third party collection agencies that collect defaulted loans on a school’s behalf.  A school needs to keep its third party collection agency informed.

While we work with applicants whose Direct Consolidation Loan applications were submitted through the Direct Consolidation Loans Web site or whose paper applications were sent to the Direct Loan Consolidation Center and that we began to process before May 18, 2014, loan holders and servicers will receive loan verification and payoff requests from the Direct Loan Consolidation Center.  These requests will end after we complete the consolidations in this queue.  Responding to these requests as expeditiously as possible will assist us bringing closure to the former consolidation system.

Contact Information

We appreciate the financial aid community’s support as we transition to the new Direct Consolidation Loan process.

General information about Direct Consolidation Loans is available on the StudentAid.gov Web site at http://studentaid.ed.gov/repay-loans/consolidation.

Contact information associated with the new Direct Consolidation Loan application process is available on the IFAP Web site’s Loan Consolidation for Applicants page and Loan Consolidation for Loan Holders and Servicers page.

   

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