Department Clarifies Consolidation Policy

The U.S. Department of Education recently issued guidance clarifying that a borrower with any eligible federal education loan may consolidate that loan, even if the borrower has only a single loan to be consolidated.

A borrower then may reconsolidate a “single Consolidation” loan made under the Federal Family Education Loan Program or the Federal Direct Loan Program consolidation program only if the loan is combined with another eligible loan that was made before or after the date of the original Consolidation loan. In Dear Colleague Letter FP-06-03, the Department noted that lenders cannot reconsolidate any single Consolidation loan on or after July 1, 2006.

USA Funds^® reminds lenders that common policy outlined in Common Manual section 15.2 requires that a borrower have at least one active loan with the guarantor that would guarantee the Consolidation loan to ensure that the new Consolidation loan retains its guarantee.

You will need Adobe Acrobat Reader to access the Dear Colleague Letter and the Integrated Common Manual from the USA Funds Web site.