How Your Application Is Processed

When a borrower consolidates loans in the Direct Consolidation Loan Program, the Federal Government pays off the loan balance on the original federal education loans and originates a new loan for the total. Here's how that works from a borrower's point of view.

It takes six simple steps to process your application after we receive it.

Step 1. Application Review: After we receive your fully completed application, it is edited, assigned an application identification number, entered into our system, and the process begins. We will contact you if additional information is needed.

NOTE: If you provided a Grace Period End Date on your Consolidation application because you still have loan(s) in a grace period and want to delay the new Consolidation Loan processing until that date, we will put your application on hold and start processing it within 45 days of the grace period end date.

Step 2. Contact Loan Holder(s): Using the loan information from your application, we contact your loan holder(s) to verify the loan's eligibility for consolidation and its current loan balances (including accrued interest, fees, or collection costs). If you currently are required to make payments on your loan(s), continue to do so. You will need to continue making payments until you receive written notification that your loan(s) has been successfully consolidated and it is time to start paying your Direct Consolidation Loan. If you are having difficulty making payments on your loan(s), contact your current loan holder(s) to find out ways to postpone payment. Ask specifically about your "deferment" or "forbearance" options.

Step 3. Contact the Internal Revenue Service (IRS): If you select the ICR Plan, we make the first of several contacts with the IRS to obtain income information for calculating your monthly payments under the ICR Plan.

Step 4. Loan Statement: After your loan holder(s) certifies the "payoff" balance(s), we will send you a letter and loan statement listing the loan(s) being consolidated. You have 15 days to review this information for accuracy and to make adjustments.

Step 5. Loan Pay Off: If we do not hear from you within 15 days from the date of our letter, we will pay off your loan holder(s). Note: Each lender is required to notify you that your loans are paid in full when they receive our payment. Your lender(s) and the Department will resolve any overpayment or underpayment issues.

Step 6. Account Set-Up: We forward payoff information to the Direct Loan Servicing Center once your loan(s) is successfully consolidated. The Direct Loan Servicing Center sends you a "Welcome" letter and information about repayment.

This multi-step process generally takes 60-90 days before the information is sent to the Direct Loan Servicing Center. You will receive a bill within 60 days of the Direct Loan Servicing Center receiving your account information.