Skip to main content
No. of Recommendations: 4
I learned today from Graduate Leverage, the loan consolidation organization I am working with on my consolidation, that the Department of Education just last week changed its rules to severely limit the "2-step consolidation" that is currently the only effective way for borrowers stuck in the single lender rule hell to lower their interest rates and extend their repayment period.

Borrowers have until March 31 to complete their consolidations or else their options will be seriously circumscribed by the Department of Education.

Here's a link:

So much for a free market economy!

Print the post Back To Top
No. of Recommendations: 0
Thanks for posting this! I read the article and it was a little confusing- do you have any more details on it? I am currently in school but will graduate in may and I plan to consolidate when I graduate. My federal loans are with several different lenders- do you think this will affect me?
Print the post Back To Top
No. of Recommendations: 0
I think the people who will have the biggest problem with this are those who have all of their federal stafford loans (subsidized and unsubsidized) through a single lender. In that case, if a borrower tries to consolidate with another non-governmental lender, the original lender can refuse to allow the consolidation. And why wouldn't they decline, since presumably the reason one would consolidate would be for a lower interest rate and the original lender would be losing money by allowing it. People were getting around this by doing a Federal Direct Consolidation loan, after which they could shop around for non-government lenders with better terms. It's this practice that the rule is limiting.

It sounds like you are probably ok as far as this goes, but you will want to look into consolidating before June when interest rates are set to go up to around 6.5 or 7. I have lauded their site before, but for the best explanations of the consolidation process and its many pitfalls go to

They have some "tutorials" that are very informative, though they are designed with graduate students in mind.

Print the post Back To Top
No. of Recommendations: 0
Does anyone know where we can get the info "straight from DOE"? I've heard about 15 different versions of what's going to happen - including that the 3-31 deadline is fake, it will (or won't - take your pick) affect loans that are already consolidated that you want to consolidat again, etc.

Where can we get the real facts? I've hunted all over DOE's website, but I can't find it.

Print the post Back To Top
No. of Recommendations: 0 is the only source in Google News that I can find announcing this, and it's a press release from a consolidator, which appeared in three different outlets...

I increasingly suspect that this is actually bogus. Note that no other consolidator seems to be talking about this rules change. Surely they'd all be pressing for this, as they want to steal business from each other... lists the recent "Dear Colleague" letters from DOE, which I think would include a change like this.

Print the post Back To Top
No. of Recommendations: 0
I take it back... Here's the "Dear Colleague" letter. Don't know why it wasn't listed with the others.

Publication Date: March 2006

DCL ID: FP-06-03

Subject: Federal Family Education Loan (FFEL) Consolidation Loans

Summary: This letter reiterates and confirms the Department's position that, beginning April 1, 2006, it will enforce the single holder rule in the making of FFEL Consolidation Loans.

References: Section 428C of the Higher Education Act (HEA)
Dear Colleague Letter FP-05-09 (September 20, 2005)
Dear Colleague Letter FP-04-07 (August 26, 2004)
Dear Colleague Letter FP-04-06 (August 26, 2004)
Dear Colleague Letter FP-04-05 (April 29, 2004)

Posted on 3-17-2006:

Dear Colleague:

In the series of Dear Colleague Letters listed above, the Department reminded participants in the student loan programs under Title IV of the HEA, as amended, of the restrictions on loan consolidation in the Federal Family Education Loan (FFEL) Program and the Federal Direct Loan Program, including the single holder rule provisions in section 428C(b)(1)(A)(i) of the HEA. The single holder rule states that a FFEL lender may not make a Consolidation Loan to a borrower unless the lender holds an outstanding loan of that borrower that would be repaid by the Consolidation Loan. However, the requirement that the lender hold an outstanding loan of the borrower does not apply if the borrower has FFEL loans held by multiple FFEL lenders or if the borrower's FFEL lender either does not offer Consolidation Loans or does not offer the borrower income-sensitive repayment terms. The Dear Colleague Letters also reminded program participants that FFEL Consolidation Loans made in violation of the single holder rule would not meet the requirements for reinsurance and other benefits under the FFEL Program.

In our earlier Dear Colleague Letters, the Department noted that Congress was considering changes to the single holder rule as part of its reauthorization of the FFEL Program. In light of that possible legislative action, the Department announced that, for a temporary period, we would not deny reinsurance on FFEL Consolidation Loans that did not comply with the single holder rule. Most recently, in Dear Colleague Letter FP-05-09 issued on September 20, 2005, the Department established a deadline of March 31, 2006, for compliance with the single holder rule.

Any FFEL Consolidation Loan made after March 31, 2006, that does not comply with the single holder rule by including at least one FFEL loan is not eligible for reinsurance and other program benefits unless the consolidating lender submitted all applicable Loan Verification Certificates (LVCs) to the holder(s) of the underlying loans on or before March 31, 2006.

Based on changes included in section 8009 of the Higher Education Reconciliation Act of 2005 (Pub. L. 109-171), a FFEL or Direct Consolidation Loan may not be made on or after July 1, 2006, to any borrower who has a Consolidation Loan in either program unless the borrower includes additional eligible loans in the new Consolidation Loan. In administering the Direct Loan Program, the Department will continue to process LVCs received from FFEL lenders through June 30, 2006, if the Direct Consolidation Loan that is the subject of the LVC resulted from a Direct Consolidation Loan application received by the Department on or before March 31, 2006. The resulting FFEL Consolidation Loan would be eligible for reinsurance and other program benefits.

Consistent with prior guidance, the Department will continue to process LVCs for borrowers with Direct Stafford and Direct Parent Loans to Undergraduate Students (PLUS) Loans.

We thank you for your cooperation in complying with this guidance. If you have any questions on this issue, please contact Pam Moran by e-mail at or by phone at (202) 502-7732.


Sally L. Stroup
Assistant Secretary for
Postsecondary Education

Theresa S. Shaw
Chief Operating Officer
Federal Student Aid

Print the post Back To Top
No. of Recommendations: 0
Greetings, all, though I have paid off my student loans nearly 9 months ago (actually I transferred them to a 0% credit card and am paying THAT off), I will chime in to say this: despite the LOOMING DEADLINE of 3/31/06 (that's this Friday, folks!), I have in the past found the Dept of Education remarkably responsive to even 11th hour efforts to consolidate. So if the single holder rule threatens to bite you, why not ask the DoE about starting the consolidation process before the deadline? Their number is (800) 848-0979 and to my recollection, I needed only to have submitted the application (online, even) prior to any deadline to qualify for timely consolidation - not having to COMPLETE the application. So all is not lost and your wallet will thank you over the next 10-30 years. What are you waiting for! The website is as an alternative way of looking things over, but I would personally call and ask to speak to a supervisor to make sure you are getting consolidation facts and steps straight.

Print the post Back To Top