Yes, With a Direct Consolidation Loan, borrowers can include certain health profession loans sponsored through the U.S. Department of Health and Human Services with other Federal education loans in their Direct Consolidation Loan. Borrowers must include at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan in the Direct Consolidation Loan.
Eligible Health Professions Loans
- Health Professions Student Loans (HPSL)
- Health Education Assistance Loans (HEAL)
- Loans for Disadvantaged Students (LDS)
- Nursing Student Loans (NSL)
The Advantages
Direct Consolidation Loans offer many advantages to borrowers of health professions loans. These include:
- a longer repayment period;
- a lower monthly payment; AND
- a single monthly payment
When deciding to consolidate a health professions loans, consider the following advantages:
- Borrowers who have defaulted on a HEAL may include the collection costs and late fees in a Direct Consolidation Loan. These fees may not be included in HEAL Refinancing.
- Under the Direct Consolidation Loan Program, HEAL borrowers may repay under the Income Contingent Repayment (ICR) Plan for the life of the loan. HEAL lenders are only required to offer an ICR Plan for the first five years.
- To qualify for an in-school deferment, Direct Consolidation Loan borrowers must be attending school at least half-time. HPSL, HEAL, and LDS borrowers are required to attend school full time to be eligible for an in-school deferment.
Issues to Consider
Before applying for a Direct Consolidation Loan, consider the following points:
- HEAL loans have fixed or variable rate that are tied to the average 91-day Treasury bill rate plus 3 percentage points. There is no maximum interest rate for variable rate HEAL loans. In contrast, the interest rate for a Direct Consolidation Loan is based on the weighted average of the interest rates on loans being consolidated, rounded to the nearest higher one-eighth of one percent. It is a fixed rate and will not exceed 8.25 percent.
- The interest on some health professions loans is subsidized by the U.S. Department of Health and Human Services. This interest subsidy is lost when these loans are included in a Direct Consolidation Loan.
- Interest does not accrue during deferment for HPSL, LDS, and NSL borrowers. Interest does accrue during deferment on the portion of Direct Consolidation Loans that include health professions loans.
- Borrowers who consolidate Health Professions Loans do not retain the deferment benefits that apply to those loans. However, they gain the deferment benefits that apply to Direct Consolidation Loans. For example, a borrower may be eligible for additional deferments if they have an outstanding balance on a FFEL made before July 1, 1993, when they obtain their first Direct Loan.
8. Can I consolidate my loans if I am enrolled in school?
Yes and No. Effective for Direct Consolidation Loan applications received on or after July 1, 2006, borrowers who are enrolled in school cannot consolidate loans that are in an in-school status. These are loans that have not yet entered or used up the 6-month grace period entitlement.
Borrowers still can consolidate loans that are in grace, repayment or deferment
Borrowers can add loans to an existing consolidation for up to 180 days after the Direct Consolidation Loan was first disbursed. If more than 180 days has passed, borrowers can apply for a new Direct Consolidation Loan. The new consolidation loan can include the original Direct Consolidation loan and must include another eligible outstanding Federal education loan.
Example: A borrower who has education loans stopped attending school for a year and the loans used up the 6-month grace period and entered repayment. The borrower returned to school and obtained a new loan. While enrolled, the borrower applies for a Direct Consolidation Loan. The Direct Consolidation Loan can include the first group of loans the borrower received, but not the newly received loans. Once the borrower leaves school again he or she can add these new loans to the existing consolidation loan or submit a new Direct Loan Consolidation application to combine the original consolidation loan and the other remaining loans.
9. Can I consolidate an existing consolidation loan?
Yes, under three conditions:
- Borrowers can consolidate existing consolidation loans into a new Direct Consolidation Loan if they include at least one other FFEL or Direct Loan into the new consolidation loan.
- Borrowers can consolidate a single Federal Consolidation Loan if the loan is in default status or has been submitted to a guaranty agency for default aversion by the loan holder.
- Borrowers can consolidate a single Federal Consolidation Loan if they intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program.
Borrowers who have only a Direct Consolidation Loan cannot consolidate again unless they include an additional loan.
NOTE: The Direct Loan Servicing Center has information on the Public Service Loan Forgiveness Program.
10. Can I consolidate my loans that are in grace?
Yes, Borrowers who consolidate loans that are in grace may receive a lower interest rate on their Direct Consolidation Loans if they are consolidating variable rate loans. However, once grace status loans are consolidated borrowers lose any remaining grace period. Borrowers receive their first bills within 60 days after the new Direct Consolidation Loan is made.
The timing in which an application is submitted is important:
- Loans first disbursed on or after July 1, 2006 have fixed interest rates. While borrowers with fixed interest rate loans can consolidate while in grace, there is no benefit to do so since the interest rates for in-grace and in-repayment are the same.
- Borrowers with variable interest rate loans should apply for Direct Consolidation Loans while their loans are in the grace status in order for them to receive the possible interest rate benefit.
- Since repayment begins within 60 days of the day the Direct Consolidation Loan is made, borrowers should not apply too early in their loans’ grace periods; otherwise borrowers lose any remaining grace period. For example, if a borrower's loans are consolidated during the second month of grace, they would begin repayment within 60 days, thus forfeiting the remaining portion of the grace period. Therefore, borrowers should wait until about half-way through the 6-month grace period before applying for a Direct Consolidation Loan.
11. What special conditions apply if I am in repayment and just consolidating now?
Borrowers in repayment who want to consolidate their Federal education loans should continue making payments until their loan holder notifies them that their loans are paid in full.
12. Can I consolidate jointly with my spouse?
No, Effective July, 1 2006 a married couple may no longer obtain a Direct Consolidation Loan as joint borrowers.
http://loanconsolidation.ed.gov/help/faq.html
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