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Question of the week

Q.: Can a lender require a borrower to have a minimum loan balance in order to originate a Consolidation loan?

A.: Yes. Although neither the Higher Education Act (HEA) nor the Title IV regulations prescribe a minimum Consolidation loan amount, the Common Manual states in Subsection 15.1.A that a lender may "[r]efuse to make Consolidation loans below a predetermined minimum amount, provided the policy does not have the effect of discriminating against borrowers based on a prohibited reason."

However, there are several areas in which a lender may not establish policies to limit Consolidation loans, as discussed in Subsection 15.1.B of the Common Manual. For example, a lender must not discriminate against an applicant based on the:

• Number or type of eligible student loans the borrower wishes to consolidate
• Type or category of school the borrower attended
• Interest rate that will be charged to the borrower on the Consolidation loan
• Types of repayment schedules offered to the borrower

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