UHEAA Bulletin Vol. 99 Issue 10

February 19, 1999
Volume 99 - Issue 10

Consolidation Loans

The recent reauthorization of the Higher Education Act includes changes to borrower eligibility and interest rates for Federal Consolidation Loans. After reviewing these changes and current policy, it has been determined that the following borrower eligibility requirements apply for consolidation loan applications received by the Utah Higher Education Assistance Authority's (UHEAA's) Loan Purchase Program (LPP) on or after October 1, 1998.

A borrower must:

have at least one loan held by UHEAA's LPP, or
have at least one loan guaranteed by UHEAA's Loan Guarantee Program, or
be currently living in Utah, or
have graduated from a Utah high school, or
have attended a Utah post-secondary school.

In addition, a borrower who has all of his or her loans held by a single lender (other than LPP) must certify in writing that the borrower has sought and has been unable to obtain a consolidation loan from that lender before applying for a consolidation loan with UHEAA LPP.

A borrower can consolidate the following types of loans: Subsidized Stafford, Unsubsidized Stafford, SLS, PLUS, Federal Consolidation Loans, ALAS, HHS Nursing, Federal Direct Loans, and Perkins Loans. If any of the loans are in default, a borrower must either make three consecutive timely monthly payments or agree to repay the consolidation loan under an income sensitive repayment plan before the consolidation loan can be processed. However, a borrower who has a loan in default on which a judgment or a wage garnishment order has been issued is not eligible for consolidation.

For consolidation loan applications received on or after October 1, 1998, the interest rate is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest 1/8 of one percent, not to exceed 8.25%. A consolidation loan borrower is eligible for interest subsidy during eligible periods of deferment only for portions of the consolidation loan that paid a subsidized Stafford loan or a subsidized Direct Stafford loan.

Loan consolidation may be a valuable tool for some borrowers. Borrowers who would like more information about consolidation loans or who are interested in applying for a consolidation loan should contact UHEAA's LPP consolidation loan processor, UNIPAC, at (800) 456-4757. Questions concerning consolidation loans can be directed to the UHEAA Policy and Training Department at (801) 321-7166.