Changes in the Federal Deficit Reduction Act Affect Student Loan Refinance and Student Loan Consolidation

The act eliminates in-school and “super-two-step” consolidations – Currently, Direct Loan borrowers may consolidate any eligible college loans that have been fully disbursed even if the borrowers have not yet entered a repayment or grace period (i.e., the student borrower may still be in their in-school period when consolidating). The “super two-step” was the ability of students to refinance a consolidation loan by consolidating out of Federal Family Education Loan Program (FFELP) into Direct Lending, then back out of Direct Loans to a Federal Family Education Loan Program (FFELP) loan.