What impact, if any, does a previous consolidation of federal education loans have on a student’s aggregate limit for federal education loans?
Stafford loan funds that a student consolidates are included in that student’s aggregate Stafford amount.
The aggregate Stafford loan limit for dependent undergraduate students is $31,000; for independent undergraduate students, the limit is $57,500. Of those amounts no more than $23,000 may be in subsidized Stafford loans.
As examples, if a dependent undergraduate student has consolidated $20,000 in Stafford loan funds, that student would have remaining aggregate Stafford loan eligibility of $11,000. If an independent student has consolidated $20,000 in Stafford loan funds, that student would have remaining aggregate Stafford eligibility of $37,500.
If a borrower consolidates Stafford loans and then applies for teacher loan forgiveness, is the borrower eligible for loan forgiveness on the underlying loans? Or, should the borrower opt to delay loan consolidation until after the end of the borrower’s fifth year of qualifying service?
The borrower may be eligible for teacher loan forgiveness on all or a portion of a consolidation loan, depending on certain aspects of the underlying loans. Only the outstanding portion of the consolidation loan that was used to pay off loans that meet the discharge criteria — none made before October 1998 and all made before the end of the period of qualifying service — is eligible for loan forgiveness.
The teacher is not penalized for consolidating loans prior to applying for the loan forgiveness, per federal regulations governing FFELP and Direct Loans.
We received and processed a signed consolidation loan application. After making the disbursement, we received notification that the borrower had died before the date that the loan was disbursed. Do we file a claim on the consolidation loan, or are we required to “undo” the loan and file a death claim only on the loan we held at the time of the borrower’s death?
Lenders are not permitted to disburse federal education loans — including consolidation loans — to deceased borrowers. A borrower ceases to be an “eligible borrower” as of the date of the borrower’s death.
Based on this premise, the consolidation loan must be “undone,” since it never was a valid loan. The holders of the underlying loans must return the balances of those loans to their original statuses on loan holders’ systems. Once the loans are rebooked and the loan holders have received acceptable documentation of the borrower’s death, they may file death claims on the loans.
A student has a consolidation loan in excess of $30,000 and applies for a loan for the new academic year. How does the school determine whether the student has exceeded applicable aggregate loan limits?
Portions of a consolidation loan that are attributed to subsidized and unsubsidized Stafford loans must be included when calculating the student’s aggregate loan balance. The financial aid administrator should use the National Student Loan Data System or loan records provided by the student to determine the portion of the consolidation loan that should be applied to the unsubsidized Stafford loan limit.