Debt Management Tips

Special Direct Consolidation

In October of 2011, President Obama announced a new short-term consolidation opportunity called Special Direct Consolidation. This consolidation loan is available from January to June 30, 2012. Special Direct Consolidation Loans are not the same as traditional consolidation loans offered through the William D. Ford Federal Direct Loan Program. The differences are displayed in the chart below:

Traditional Direct Consolidation Loan Special Direct Consolidation Loan
Repayment Term The repayment term for the loan starts over, giving students longer to repay their loan. A longer repayment term may result in lower monthly payments but will ultimately increase the amount the borrower will pay over the life of the loan since more interest will accrue over a longer repayment period. Each loan that is consolidated retains its original repayment term. As a result, borrowers will pay less interest over the life of the loan than they would under the traditional consolidation program.
Interest Rate A fixed rate based on the weighted average of the interest rates of those loans being consolidated rounded up to the nearest one-eighth of 1%, not to exceed 8.25%. A fixed rate (not to exceed 8.25%) after applying the 0.25% interest rate reduction to the FFEL loans being consolidated.
Electronic Debit Benefit Eligible for a 0.25% interest rate reduction if the loan is repaid through the Department's automatic debit system. Eligible for an additional 0.25% interest rate reduction if the loan is repaid through the Department's automatic debit system.

Only certain borrowers will be eligible for Special Direct Consolidation Loans. Eligible students will be notified by a Department of Education Servicer. Borrowers do not need to take any action until they are notified. If you consolidate your loans into a traditional Direct Consolidation Loan before Special Consolidation Loans are available, you will not be eligible for a Direct Consolidation Loan.

For more information on the benefits and eligibility criteria for the Special Direct Consolidation Process, visit