Direct Loan Consolidation

Written by Nicole Madison
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To determine eligibility for Direct Loan consolidation the loan status, such as in school, out of school, or in default, must first be established. Next the type of loan: student, parent, or married, must be established. Your eligibility depends on several different factors based on your status.

Eligibility for Direct Loan Consolidation

Student borrowers who are currently in school meet Direct Loan consolidation eligibility requirements if they are enrolled in a Direct Loan school and include a minimum of one Direct Loan or FFEL in an in-school period. Student borrowers who are not attending Direct Loan schools are eligible if they have a minimum of one Direct Loan and include at least one Direct Loan or FFEL in an in-school period. Out of school borrowers are eligible for a Direct Loan consolidation if they include at least one Direct Loan or Family Federal Education Loan (FFEL) and have either been unable to secure a Federal Consolidation Loan with a FFEL lender or have not been able to secure a Federal Consolidation Loan with income sensitive repayment terms.

Parent borrowers with Plus loans, who are currently enrolled in school themselves, are eligible to consolidate if they include other eligible loans other than Plus loans in an in-school period when requesting Direct Loan consolidation. After meeting these requirements, parent borrowers must meet the other in-school borrower requirements. Parent borrowers are considered out of school if they have only Plus loans or have Plus loans or other loans on which they are making payments. They are also considered out of school if they have Plus loans or other loans that are in a grace period, deferment, or forbearance. Out of school parent borrowers are eligible if they include at least one Direct Loan or FFEL and haven't been able to secure a Federal Consolidation Loan.

Parents must also meet credit requirements to be eligible for Direct Loan consolidation. They typically must have a positive credit rating. If parents do not have a positive credit rating, they may still be eligible if they are able to obtain a cosigner with a positive credit rating for the Plus portion of the consolidation loan. In some cases, documentation of extreme reasons for the negative credit rating may be accepted as well.

Married in school borrowers may be eligible for consolidation if they both meet all the requirements for in school requirements for student borrowers. However, married out of school borrowers are eligible if either of the spouses meets the out of school requirements for students. Married borrowers should carefully consider their decision to consolidate their loans jointly. Both borrowers are financially responsible for the repayment of the consolidation loan regardless of separation, divorce, or the disability of one spouse. If one spouse dies the other spouse is responsible for repaying the entire debt.


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