This report describes progress in addressing problems identified earlier in the process of consolidating student loans under the William D. Ford Federal Direct Loan Program (FDLP) or the Federal Family Education Loan Program (FFELP). Consolidation loans allow borrowers to extend their repayment periods and may combine loans under either or both programs. The evaluation involved interviews with four FFELP lenders about their experiences with the Department of Education (ED) and its contractor for loan consolidations, analysis and collection of data on borrower experiences under the original and updated (as of December 1997) FDLP servicing system, and analysis of ED data on consolidation application processing and data transmission. The four lenders reported that the consolidation process has improved, with fewer duplicate requests and incorrect payments. Progress in resolving problems in transmitting data to the FDLP servicing system and in time needed to process consolidation applications was also reported. Attached enclosures include detailed data on application processing time and the formal response of the Department of Education, which notes additional changes the Department has made or plans to make to the consolidation process. (DB)