Credit Card Andy

Teaching the Basics of Personal Finance

Special Direct Consolidation Loans (Student Loans)

I recently received a request from a reader to do a post on an email he received regarding his student loans. I figure some of you out there may have received something similar and the deadline for acting is June 30th, 2012. This does not apply to students who are still students.

The email goes something like this:

Dear Student Name:

We haven’t heard from you regarding this limited-time opportunity offered by the U.S. Department of Education to consolidate your eligible federal student loans. Join thousands of other eligible student loan holders in making the repayment of your loans as manageable as possible. Applying is easy!

How this benefits you:

• One servicer and one payment for all your eligible federal loans,

• A potential lower combined payment amount, and

• Up to 0.50% interest rate reduction!*

The Department of Education has prefilled your application and it’s waiting for you at Just sign in using your Federal Student Aid PIN and click the link in the Alert section on the right to complete the application.
The Department of Education has been sending emails to qualifying students since January of this year, and if you have recently received one of these notices listen up!

If you are eligible for this offer, do it (and quick before the offer ends).

Here is the official government website concerning the special program. It also tells you how to check if you’re eligible. It’s a program to consolidate multiple student loans into one to make it easier for you to payback.


I cannot think of one reason to not take the offer. I spent a few hours looking for one, but couldn’t. In my research, I came across a new internet company focused solely on student loans called Alltuition. They had very knowledgeable articles as well as this live chat where I talked to one of their employees. No, this isn’t some marketing ploy, I just thought it was cool. I asked him some detailed questions to see if there were any downsides and he agreed that there was almost no downside.

The biggest downside of taking this offer is that you might not be able to consolidate all your loans if some do not qualify. If you have 3 different loans, and one does not qualify, then you would only be able to consolidate from 3 to 2. However, managing 2 loans is still easier than 3.


So what do you get out of it? This is all highlighted in the official website, but I’ll highlight some of the big benefits.

  1. You only have to worry about one payment a month (assuming all of your student loans are eligible)
  2. They will lower whatever interest rate you were paying before by 0.25% (lower payments!)
  3. The repayment term remains the same (the life of the loan does not get reset so you don’t pay any extra interest over the life of the loan)
  4. No prepayment fees (important if you want to pay your student loans off early and save yourself money)
  5. You have the opportunity to choose a new payment plan (standard repayment, income-based repayment, etc.)
  6. There is an addition 0.25% interest rate reduction if you setup automatic loan repayments
    Basically, you get one loan payment a month that is lower than what it used to be. You can still pay it back early if you want and you have the opportunity to change your repayment plan if you want.

Different than Traditional Loan Consolidation

Please note, that this is a very special case. I am talking only about the Special Direct Consolidation Loans. This differs from the traditional Direct Consolidation Loan. There are downsides to consider with these and is a case by case decision.

If you qualify for one of these Special Direct Consolidation Loans, thank President Obama.

Other Loan Questions

I should consider doing more posts on student loans. Look into putting money towards the principle of your loan as early and quickly as possible. Doing so will drastically cut down on how much you pay on your loan over the life of the loan. Alltuition has some other good articles on other student loan related topics.

As always, let me know if you have any questions or comments below.