Direct Loans Servicing

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Direct Loans Servicing:

The federal government offers Direct Student Loans to borrowers at a low interest rate, allowing student to finance their post-high school education with affordable student loans. Rather than a bank or other financial institution servicing those loans, they are issued and handled by the U.S. Department of Education. The Direct Loans Servicing Center becomes the one-stop office that a borrower works with on loan repayment options.

Borrowers who set up accounts at the Direct Loans Servicing Center(www.dl.ed.gov/borrower/BorrowerWelcomePage.jsp) can manage their accounts online using their U.S. Department of Education PIN (the same PIN given when applying for federal loans or filling out FAFSA). Making payments online, seeking information about Direct Loan Consolidation and other repayment FAQ's are available at the Servicing Center. 

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Direct Loans Terms and Repayments:

Direct loans begin repayment when the student finishes or leaves school, after an initial grace period. The grace period for Direct Loans and most FFEL loans is six months; Perkins loans have six to nine months depending on initial disbursement; and health professions loans have nine to twelve months.

Several repayment options exist for direct loans, including standard, extended, graduated and income related repayments.

1. Standard repayments are fixed amount monthly payments of at least $50 over a 10-year term. The monthly payment amount is higher, but the overall interest you pay is less typically than with other repayment options.

2. Extended repayment options are for borrowers with more than $30,000 in direct loans. Loans are paid back over 25 years, in either fixed monthly payments or graduated monthly amounts that start lower and increase every two years.

3. Regular Graduated repayment is a low initial monthly payment that increases amounts every two years. This is a 10-year repayment term.

4. Income Contingent repayments are 25-year terms based on an annual calculation from your adjusted gross income (AGI) as reported on your taxes. A monthly payment amount is established based on the total of your direct loans, your AGI plus, if married, your spouse's income and family size. You'll pay the lower amount of either 20% of your monthly discretionary income or a 12-year loan repayment plan amount multiplied by a variable income factor changing with your annual income.

5. Income-Based repayment is calculated as a monthly payment based on your income at times when you have some financial hardship. The terms of repayment may exceed 10-years and under certain qualifications over a length of time, remaining portions of your loan balance may be cancelled.
 

Direct Loan Consolidation:

Under the Higher Education Act loan consolidation is available to borrowers on all forms of student loans including Federal Family Education Loans (FFEL) and Direct Loans. Direct Loan consolidation is intended to make the repayments of multiple loans simpler with a single monthly payment. It also often lowers the interest rate compared to one or more than one of the individual loans so that the borrower is less likely to default on the loan during repayment. Direct Loan Consolidation essentially pays off the existing loans and combines the totals into a new single loan.

Borrowers who wish to apply for Direct Loan consolidation can apply online at the Direct Loan Servicing Center under the loan consolidation link at their website found at https://loanconsolidation.ed.gov.


Loans Eligible For Direct Loan Consolidation

Both subsidized and unsubsidized loans issued from the federal government are eligible for Direct Loan Consolidation, including Federal Stafford Loans, Guaranteed Student Loans, Direct Subsidized Loans, Federal Insured Student Loans, TEACH loans, Nursing Student Loans, Federal PLUS loans, Direct PLUS Loans, Perkins Loans, HEAL loans, Loans for Disadvantaged Students and others.

For a complete list, see the eligibility page at the Direct Loan Servicing Center: http://loanconsolidation.ed.gov/index.html

Some loans are not eligible for Direct Loan Consolidation such as private lender or state loans that aren't guaranteed by the government, Primary Care loans, PLATO loans and Medical Assist loans. These may be considered in calculating repayment terms on your Direct Loan Consolidation, however.

Contacting the Direct Loan Servicing Center:

The Direct Loan Servicing Center can be reached by toll-free phone (1-800-848-0979) during business hours of 8 a.m. to 8:30 p.m. EST and 5 a.m. through 5:30 p.m. PST, Monday through Friday. Online account information is accessible 24/7 at www.dl.ed.gov. Email the Direct Loan Servicing Center using your account PIN via the link on the "Contact Us" page of the website.

For Direct Loan Consolidation information, contact the center toll-free at 1-800-557-7392 or for hearing impaired persons, TTY at 1-800-557-7395. You can use the Direct Loan Consolidation calculator to estimate your monthly payments if you are trying to decide if loan consolidation is for you.

The Direct Loan Servicing Center offers repayment calculators, so borrowers can plan for the terms of their loan repayment and begin calculating expected interest rates when their loan comes to repayment. Additional information is available about each kind of repayment plan, adding loans to an already consolidated direct loan, other forms of student aid and electronic payment options. Direct loan services and current year tax information for loan borrowers is available here.