Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
What Lending Institutions can be consolidated through Direct Loans?

From reading this board and Direct Loans online, consolidation through Direct Loans seems limited to people who have at least one loan through Sallie Mae or Direct Loans.

Am I right in assuming if you have all your Stafford loans through another institution, then you can't consolidate through Direct Loans?

T.H.E. (Total Higher Education) is specifically the insitution I'm inquiring about, if anyone has specific information. They offer a conslidation loan, without the 0.8% incentive. I would like to take advantage of the 0.8% incentive through Direct Loans if possible.

Thanks.

-H
Print the post Back To Top
No. of Recommendations: 0
Oh, and this would be an In-School consolidation loan.
Print the post Back To Top
No. of Recommendations: 0
Any Stafford can be, as well as Perkins or any other kind authorized by the Higher Education Act. It doesn't have to be with Sallie. It can be with Podunk Natioanl Bank. Sallie gets mentioned a lot cause it's big.

You need to already have a Direct Loan to do an in-school consolidation; otherwise, you must at least be in your grace period.

If you graduate before June 30, 2002, you would be able to get the May 2001 auction rate, but not the 80 basis point discount (unless it is still offered after September 30, 2001.) You would get whatever your grace period interest rate is. (usually: 91 day T-bill plus 170 basis points.)
Print the post Back To Top
No. of Recommendations: 1

Any Stafford can be, as well as Perkins or any other kind authorized by the Higher Education Act. It doesn't have to be with Sallie. It can be with Podunk Natioanl Bank. Sallie gets mentioned a lot cause it's big.

You need to already have a Direct Loan to do an in-school consolidation; otherwise, you must at least be in your grace period.

If you graduate before June 30, 2002, you would be able to get the May 2001 auction rate, but not the 80 basis point discount (unless it is still offered after September 30, 2001.) You would get whatever your grace period interest rate is. (usually: 91 day T-bill plus 170 basis points.)


I read and re-read the Direct Loan information enough times that it finally clicked. For in-school Direct Loan consolidation, you need to be in one of two scenarios:

1. Attending a Direct Loan school AND have a Direct Loan (or other FFEL) in an in-school status
2. Attending a non-Direct Loan school AND have at least one Direct Loan

Odds are if you're at a Direct Loan school you have Direct Loans, otherwise you're at a non-Direct Loan school and have other FFEL loans.

This case is actually for my brother, and he does not attend a school that is part of the Direct Loan network. That is why he has all his loans through THE. So he falls into category 2. He doesn't have any Direct Loans, so he's out of luck. He'll have to consolidate through THE instead of Direct Loans. It will still lock in 5.39%. But how nice would 4.59% have been? :)

However, if someone is attending a Direct Loan school and has their loans through other lending institutions, my understanding is that Direct Loan will consolidate their loans without having a Direct loan previously (as long as they are in-school status).

I'm just a little disappointed that my Direct loans in repayment are only dropping to 6.79% (from 8.25%). With the 0.8% incentive, I'll still be able to get 5.99%, but I thought I was going to get 5.19%.

The quoted 5.99% for loans in repayment are for the ones only disbursed after July 1998. Everyone else that has loans older than that get 6.79%. That's still a 1.46% improvement (2.26% if you tack on the incentivement). I can't imagine the interest rate getting much lower, so now's probably as good time to consolidate.

New rates: http://www.eduservices.com/helpcenter/calcint/help_currentintrates.asp

-H


Print the post Back To Top
No. of Recommendations: 1
<<I read and re-read the Direct Loan information enough times that it finally clicked. For in-school Direct Loan consolidation, you need to be in one of two scenarios:

1. Attending a Direct Loan school AND have a Direct Loan (or other FFEL) in an in-school status
2. Attending a non-Direct Loan school AND have at least one Direct Loan

Odds are if you're at a Direct Loan school you have Direct Loans, otherwise you're at a non-Direct Loan school and have other FFEL loans.

This case is actually for my brother, and he does not attend a school that is part of the Direct Loan network. That is why he has all his loans through THE. So he falls into category 2. He doesn't have any Direct Loans, so he's out of luck. He'll have to consolidate through THE instead of Direct Loans. It will still lock in 5.39%. But how nice would 4.59% have been? :)>>


If your brother does not attend a "Direct Loan school" and doesn't otherwise have any Direct Loans, how is he in category 2? I think he is in a later example of the site (I haven't looked at it lately so I am doing this from memory.) That's the one where T.H.E. gets to offer "income contingent repayment terms acceptable to the borrower" and the borrower gets the choice to either go with those terms, or reject them and go with Direct. The choice was definitely with the borrower in 1995, and I believe that is still the rule today.

If his grace period starts before September 30, 2001, he can get the same deal as we have all been talking about here. If he graduates after 9/30/01, he may still get a Direct Loan incentive discount if one is still out there being offered. We have previously discussed the politics behind this, and you should go back to those posts.

If your brother graduates some time after July 2002, then he is "at the mercy" of whatever T-bill auctions there are to come. Who knows, the rate may actually be lower then. It really depends on the economy. Also, (and this is from previous posts), the whole Higher Education Act comes up for renewal before October 2003---so it's anyone's guess what rates on NEW consolidations of that time will be.


<<However, if someone is attending a Direct Loan school and has their loans through other lending institutions, my understanding is that Direct Loan will consolidate their loans without having a Direct loan previously (as long as they are in-school status).>>

Yes, and even once they are out of school. Remember, anyone can go with Direct Loans. They just have to give their current lender a shot at keeping the business. I'm near certain that rule hasn't changed, and Ann references it in her Motley Fool article.

<<I'm just a little disappointed that my Direct loans in repayment are only dropping to 6.79% (from 8.25%). With the 0.8% incentive, I'll still be able to get 5.99%, but I thought I was going to get 5.19%.>>

You get 6.075% actually, since the 6.79% is rounded up to the nearest 1/8%---so 6 7/8% less the 80 basis points. But there is also the 25 basis point direct debit discount, which can bring you to a 5.825%.

<<The quoted 5.99% for loans in repayment are for the ones only disbursed after July 1998. Everyone else that has loans older than that get 6.79%. That's still a 1.46% improvement (2.26% if you tack on the incentivement). I can't imagine the interest rate getting much lower, so now's probably as good time to consolidate.>>

Actually, 5.99% goes to loans disbursed after October 1, 1998, AND consolidations done between October 1, 1998 and January 31, 1999. Folks who borrowed during summer 1998 get something sounding like "blended long-term rate plus 100 basis points", which I think relies on the 10-year note auction with an extra 1% tacked on.

This was the rate (mentioned in an earlier post--sorry I keep pointing this out!) that Sallie Mae and the other lenders claimed they would have to refuse loans under, or leave the business. They strong-armed Congress into agreeing to 91-day T-bill plus 230 basis points. It's how I'm having a hard time figuring out today how the consolidators are going to make money if they lend long-term at a fixed 6%. I'm beginning to believe that they are going to fight like heck to keep the high rate borrowers, and let the T-bill plus 230 crowd migrate over to Direct.

Now is probably a good time to consolidate, but I have disagreed with other posters that now is going to be the ONLY good time going forward to consolidate. I think the 91-day T-bill can be as low in May 2002 as it is today, but I don't put money on the Administration extending the 80 basis point incentive---since I know that Sallie Mae has already threatened a suit about it, and I am sure Sallie gave to the Republican Party in the last election cycle.

I can see Congress in 2003 (depending who is in charge) making a favorable rate on Direct Loans already with the Ed Dept, when the Higher Ed Act is renewed. Not to say it will happen, only that it could happen (since these loans have already been taken away from the private sector and it wouldn't be money coming out of Sallie, T.H.E., Nellie's pockets.)
Print the post Back To Top
No. of Recommendations: 0
If your brother does not attend a "Direct Loan school" and doesn't otherwise have any Direct Loans, how is he in category 2? I think he is in a later example of the site (I haven't looked at it lately so I am doing this from memory.) That's the one where T.H.E. gets to offer "income contingent repayment terms acceptable to the borrower" and the borrower gets the choice to either go with those terms, or reject them and go with Direct. The choice was definitely with the borrower in 1995, and I believe that is still the rule today.

If his grace period starts before September 30, 2001, he can get the same deal as we have all been talking about here. If he graduates after 9/30/01, he may still get a Direct Loan incentive discount if one is still out there being offered. We have previously discussed the politics behind this, and you should go back to those posts.

If your brother graduates some time after July 2002, then he is "at the mercy" of whatever T-bill auctions there are to come. Who knows, the rate may actually be lower then. It really depends on the economy. Also, (and this is from previous posts), the whole Higher Education Act comes up for renewal before October 2003---so it's anyone's guess what rates on NEW consolidations of that time will be.


When I said he was in "category 2", I meant that he attends a non-DirectLoan school. So he would need to meet the requirements set forth for that category (attending a non-DirectLoan school and having at least one Direct Loan and at least one Direct Loan or FFEL in an in-school period). He doesn't meet this requirement.

The Student Guide from the Direct Loan site says:

"Borrowers who are consolidating all FFEL loans that are in a grace or repayment period must certify on the application that they have checked with a FFEL consolidation lender and (1) have been unable to obtain a Federal Consolidation Loan, or (2) have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them. The reason why a borrower may be unable to obtain such a loan include but are not limited to: (1) lenders requiring a minimum loan amount, and (2) some lenders not offering income-sensitive repayment terms."

This does not include in-school borrowers. The conditions for consolidation for in-school borrowers are what I illustrated in my previous post. Here are examples directly from the guide related to in-school borrowers:

"A borrower who is attending a Direct Loan school half time and wishes to consolidate all of her loans (two FFELs in an in-school period) is eligible for in-school consolidation.

However, a borrower who is attending a non-Direct Loan school half time and wishes to consolidate all of his loans (two FFELs in an in-school period) is NOT eligible for in-school consolidation."

The "half-time" term is just what Direct Loan uses to designate a full-time student (eligible for loans). The second example is where my brother lies.

I plan on paying my loans off in the next 12-24 months, so the rate cut won't do that much for me (might save a few hundred bucks). I'll settle for something near 6%. But locking in something in the low to mid 5% could save my brother alot of money while still in school. Just trying to figure out the best plan for him.

-H
Print the post Back To Top
No. of Recommendations: 0
hberes writes:

<<For in-school Direct Loan consolidation, you need to be in one of two scenarios:

1. Attending a Direct Loan school AND have a Direct Loan (or other FFEL) in an in-school status

2. Attending a non-Direct Loan school AND have at least one Direct Loan

Odds are if you're at a Direct Loan school you have Direct Loans, otherwise you're at a non-Direct Loan school and have other FFEL loans.

This case is actually for my brother, and he does not attend a school that is part of the Direct Loan network. That is why he has all his loans through THE. So he falls into category 2. He doesn't have any Direct Loans, so he's out of luck. He'll have to consolidate through THE instead of Direct Loans. It will still lock in 5.39%. But how nice would 4.59% have been? :)>>


Where I got lost was figuring out how he fits into Category 2 above---simply because you are also saying that he doesn't have any Direct Loans either. You must mean a second category that's in Direct's text, not the "2." above.

Like I mentioned, the best he could have done was 4.7%, since they round the 5.39% up to the nearest eighth (5 4/8% or 5.5%).

He can also achieve almost this rate if he graduates between July 1, 2002 and June 30, 2003, AND the last T-bill auction of May 2002 has an investment rate of 3.05%. (This is of course because the grace period interest rate add-on is only 170 basis points.) After July 1, 2003 it turns out (I had thought it was October 2003), the Higher Education Act rate statute has to be extended--and I still hold the view that it's anybody's guess what the new rate structures will be. (Part of the add-on interest rate is supposed to cover for "servicing costs", which are dropping consistently because of things like internet technology.) So there's still a lot of hope out there.


Print the post Back To Top
No. of Recommendations: 0
Where can I find out information regarding Direct Loan consolidation? What are the necessary steps to consolidate? If I have a school loan, a Direct Loan and a Great Lakes loan, can all three be consolidated?
Print the post Back To Top
No. of Recommendations: 0
Yes, and especially since you already have a Direct Loan, you shouldn't get any hassle consolidating the three as long as the other two are federal loans like Stafford or Perkins.
Print the post Back To Top