Meharry Loan Consolidation Primer

[1] you graduated before July 1st 2005 and:

	a. consolidated b. did not consolidate c. did not consolidate with a single or multiple lender

Did NOT Consolidate With A Single or Multiple Lenders

You must have two different lenders to have consolidation choices. Under current regulations, if all of your eligible Federal loans are with the same lender and that lender offers loan consolidation, you have no choice and must consolidate with that lender. This is known as the “single-holder rule.” This rule does not apply if all loans are with the Federal Direct Loan Program, hence you may wish to consider a “Super Two-Step” strategy where you first consolidate your single lender loans with the Direct Loan Program and then reconsolidate with the consolidation lender of your choice.
This “Super Two-Step” strategy provides you with the advantage of consolidation lender and borrower benefit choice. The Direct Loan Program offers only a single borrower benefit; a 0.25% rate discount for automatic debit payment. More robust borrower benefits such as the Meharry Loan Consolidation Program’s immediate 0.75% (immediate 0.50% interest rate reduction at disbursement plus 0.25% for auto debit) or 1.25% (1.0% after 36-regular on-time regular payments plus 0.25% for auto debit) which will never be lost once earned and may reduce your Post-July 1st 2005 rate to as low as 3.50% are available from FFELP consolidation lenders.
The immediate 0.75% option is recommended for those borrowers who plan to pay off their loans in 5 – 7 years. However, given the current low interest rate environment, choosing this option is generally not the wisest, financially astute decision given that there are no cost, no prepayment penalty and possible tax benefits (consult with your tax professional) for consolidating and most of your other financial obligations charge significantly higher interest rates.
Please note that Direct Loan borrowers beginning in 2000/2001 were eligible for a repayment incentive that reduced the borrowers fees at the time of loan origination from 3.0% to 1.5%. For this fee reduction to remain permanent, the borrower must make 12 on-time monthly payments once mandatory repayment begins. If the borrower consolidates with Direct Loans, the fee reduction carries forward to the consolidation loan. If the borrower consolidates with any other lender/program the fee reduction incentive is lost and added back to the loan principal. This incentive is only for loans originated with the Direct Loan program.
Although adding the 1.5% origination fee reduction back into a non-Direct consolidation appears to be a significant expense, simulations demonstrate that the Meharry Loan Consolidation Program borrower interest rate discount of 1.25% provides significantly more savings for the borrower than if the consolidation remained with the Direct program.
Private/alternative loans cannot be included in a Federal consolidation loan and private/alternative loan lenders do not qualify as second lenders for Federal loan consolidation.
FFELP lenders and programs including our Meharry Loan Consolidation Program (1.800.741.4704) and the Direct Loan Program -1.800.557.7392 offers Federal student loan consolidation. Before completing a consolidation application be sure to review the Meharry Loan Consolidation Guide, Consolidation Discounts - TOO GOOD TO BE TRUE?, which will assist you in understanding the fine print of discount benefits. Also visit When Considering Student Loan Consolidation - Keep in Mind for information and answers to important consolidation questions.