What are the Differences Between FFEL and Direct Consolidation Loan?
Borrowers are encouraged to check with their existing loan holders or servicers to find out about consolidation options available to them. Some differences between programs may include: • Minimum balances or numbers of loans required to apply. • Types of loans that can be consolidated. • A prior account relationship may be required. • Repayment incentive benefits to encourage good repayment behavior. • The convenience of electronic debit, ensuring that monthly payments are made on time. • Repayment plans offered, such as payments sensitive to a borrower’s income, family size, and total education indebtedness.
Even though the Higher Education Act (HEA) authorizes both Federal Family Education Loan (FFEL) and Direct Consolidation Loan programs, there are a number of differences between the programs as noted below: Lender Options All eligible loans that an eligible borrower requests to be consolidated must be accepted by the Direct Consolidation Loan Program. FFEL Consolidation lenders may accept all eligible loans for their Consolidation loans, but some lenders may not consolidate some non-FFEL loans. For example, some FFEL lenders may not include a HEAL loan in their FFEL Consolidation loans but instead may offer a separate HEAL consolidation loan with different terms. Repayment Plans FFEL Consolidation lenders are required to offer the borrower a Standard Repayment Plan, a Graduated Repayment Plan, an Extended Repayment Plan for new borrowers after 1998 owing $30,000 or more, and an Income-Sensitive Repayment Plan.
