Cancellation or Discharge
A cancellation or discharge releases you from all obligations to repay the loan. If you think you qualify for a discharge you must apply to the holder of your loan.
Qualifications for a Cancellation (Discharge) of a Loan
Loans are only discharged under specific circumstances and as long as you're not in default on the loan.
Examples are:
- Death
- Total permanent disability
- Your loan might be discharged for working in a designated low-income school.
- Other cancellations are loan specific
Your loan cannot be cancelled because:
- You did not complete the study at your school (unless you couldn't complete the program for a valid reason - because the school closed for example.)
- You didn't like the school or program of study
- You didn't obtain employment afterwards
Consolidation
You can consolidate (combine) multiple federal student loans with various repayment schedules into one loan. You may get either a FFEL Consolidation Loan or a Direct Consolidation Loan.
Benefits of a Consolidation Loan
- Make one monthly payment
- Your payments can be significantly lower
- You can take longer time to repay (up to 30 years)
- You can pay a lower interest rate than on one or more of your existing loans
- You can consolidate your loan during grace periods, once you entered repayment, or during periods of deferment or forbearance.
Interest rate for a Direct and FFEL Consolidation Loan
The interest rate is a fixed rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on the loans you consolidate, rounded up to the nearest 1/8 of a percent. The interest rate cannot exceed 8.25%.
How to get a consolidation loan
- FFEL Consolidation loan - You (or your parents for a FFEL PLUS Consolidation loan) can contact the department of a participating lender for an application and more information.
- Direct Consolidation Loan - You (or your parents for a Direct PLUS Consolidation Loan) can contact the Direct Loan Origination Center's Consolidation Department at 1-800-557-7392 or you can go to www.loanconsolidation.ed.gov.
