Repayment plans
FFEL Consolidation lenders are required to offer the borrower a standard repayment plan, a graduated repayment plan, and an income-sensitive repayment plan. The details of those plans may differ by FFEL lender. The repayment plans in the Direct Loan program include standard repayment, graduated repayment, extended repayment, and income-contingent repayment. The terms of income-contingent repayment are provided in regulations. The monthly payment amount is based upon a formula that takes into account the borrower’s income, family size, and loan amount. Under income-contingent repayment, balances unpaid after 25 years are forgiven. Many borrowers choose Direct Loan consolidation precisely because it provides them with the option of repaying under the income-contingent repayment plan.
Assistance for defaulted borrowers
FFEL lenders may choose not to make consolidation loans to borrowers who have defaulted on prior loans or not allow them to include a defaulted loan in the consolidation. The Direct Loan program has options for a defaulted borrower to consolidate and regain eligibility for Federal student aid.