The Department of Education today issued Dear Colleague letters that will continue for at least another year the ability of FFELP consolidation loan lenders to make loans consisting only of Perkins or Direct Loans. Usually this is used as a way to avoid the single holder rule, which in most circumstances only permits a lender to consolidation FFELP loans from a borrower who has FFELP loans with more than one lender.

The Department published on the IFAP two letters saying that the government will continue to reinsure consolidation loans that consist of only Perkins or Direct Loans beyond the cutoff of September 1, 2004, that was put in an April 29 Dear Colleague letter. In the letters, Assistant Secretary for Postsecondary Education Sally Stoup said that the Department had expected Congress to have acted by September 1 on reauthorization of the Higher Education Act and clarify the single holder rule, but since it's now clear that won't happen, the Department will not deny reinsurance to consolidation loans that consist solely of Perkins or Direct loans. Loan holders were instructed to process consolidation loan requests for loans held by more than one lender, even if they believe they involve a two-step process. The letters made it clear that the Department will permit lenders to make a consolidation loan consisting only of Federal Perkins Loans or of Federal Direct Loans.

The Department's moves would appear to make unnecessary an amendment which attempted to negate the April 29 ruling that was added to the House appropriations bill for the Department of Education in July at the request of Rep. Randy "Duke" Cunningham (R-CA).

The letters can be found at http://www.ifap.ed.gov/dpcletters/FP0406.html and http://www.ifap.ed.gov/dpcletters/FP0407.html

Harrison: hwadsworth@wpllc.net
Andrew: astringer@wpllc.net