Discover Stafford Loans

[_T_]

That Number is just for reg. grad Medical school is much more (158,000???) ha ha I ask that same question when I talked to them on the phone. I went with Discover too

lol yea its crazy that three of the reps I spoke to on the phone had no idea..

Any idea how long the whole approval process takes? I applied two days ago but no updates.. I just wanna make sure everything is taken care of before school starts in two weeks!

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[lucky lady]

lol yea its crazy that three of the reps I spoke to on the phone had no idea..

Any idea how long the whole approval process takes? I applied two days ago but no updates.. I just wanna make sure everything is taken care of before school starts in two weeks!

Have you signed your prom. note? most schools are notified when you apply and they contact your school and they do all the work It does take a few days but not to worry wait until monday and call it you haven't heard anything.

I took a few days for Discover to send me the Note to sigh. At my school even if the money hasn't been funded but you have started the process your golden.

 

[fenil2005]

can someone explain this to me,this is straight from the discover website
"Zero payments until 6 months after graduation or enrollment in school less than half-time 10 to 25 year repayment period"
so do I have to start paying the loans after 2 years as it takes 4 years to get pharm.D degree

 

[Guile]

can someone explain this to me,this is straight from the discover website
"Zero payments until 6 months after graduation or enrollment in school less than half-time 10 to 25 year repayment period"
so do I have to start paying the loans after 2 years as it takes 4 years to get pharm.D degree

I believe it's just saying that once you've graduated or you're enrolled in school less than half-time you'll be in "repayment." So, if for whatever reason you drop to less than half time while in school or you graduate you'll enter repayment. However you can apply for economic deferment once you're in repayment so you don't have to make payments.

 

[fenil2005]

I believe it's just saying that once you've graduated or you're enrolled in school less than half-time you'll be in "repayment." So, if for whatever reason you drop to less than half time while in school or you graduate you'll enter repayment. However you can apply for economic deferment once you're in repayment so you don't have to make payments.

thank you for your quick answer...

 

[Hysteria24]

Officially selected Discover as my lender today!

Now looking forward to writing big checks to them every month for many, many years to come.

 

[Madcoomofo]

So this might be a stupid question, but when the application asks when your first and last loan payment dates should be, is everyone putting the exact month of the start date of school, and the exact month of the end date of school?

 

[med11]

OK I'm a noob, but I just called discover, and their interest accrues every month. Is that how it is for other lenders too? I always thought it was annually.

Edit: i called again, and someone else says it's yearly.

 

[slick cat]

So this might be a stupid question, but when the application asks when your first and last loan payment dates should be, is everyone putting the exact month of the start date of school, and the exact month of the end date of school?

I put Aug. 2008 until Aug. 2009 and then my school changed it to Aug. 18, 2008 (first day of class) until May 12, 2009 (last day of class).

 

[FenixTx]

f

 

[jammocah]

I think those asking/answering the question are confused.

1- When is it capitalized? Once at repayment (not monthly or while you're still in school which would be bad)

2- How often is it compounded (once it's capitalized and you're IN the repayment period)? Monthly (Yearly would be best but its hard to find one that does this)

If you had a savings account... you'd want interest to accrue daily (best) but most do monthly. If you're paying a loan.. you'd want interest to accrue yearly (best).. not daily (worst)

You should ask BOTH questions as they both will apply. It's not one or the other.

 

[UserNameNeeded]

There is confusion, but it's really not the fault of the student borrowers. A few weeks ago, when I called Discover, I had to define and explain to the representative the difference between capitalizing and compounding. She still had no good answer for me. The same type of evasive, uninformed answers are spouted by the representatives of every student lender (and sometimes financial aid counselors, too). I, like so many others, were explicitly promised borrower benefits could not be revoked retroactively. Guess what happened? T.H.E. hit the skids and my borrower benefits that were to take place during repayment are gone and my financial aid counselor still has no clue how that happened. T.H.E. claims they had a disclaimer that these benefits can be taken away, but the the original paperwork they sent me does not have the disclaimer, just the borrower benefits I should expect, along with the MPN.

As for the compounding of interest, the MPN never calls it "compounding" and it sticks with the the 'capitalization' term.

Yes, when you first enter the repayment period, any accrued interest will be capitalized to the original loan amount. Once you're in repayment, the MPN states: "Generally, capitalization may occur no more frequently than quarterly." So, I assume all the new interest during the 10+ years of repayment will be compounded quarterly.

What really hacks me off is how nebulus the student loan information is-- the MPN doesn't have any specifics on what the interest rate is, when the accrued interest is capitalized or how interest is compounded. Nearly everything in there is hypothetical with no specific numbers, figures, dates, procedures, etc.

Here's an examples: "All payments and prepayments may be applied in the following order: late charges, fees, and collection costs first, outstanding interest second, and outstanding principal last."

What the hell is this "may"? Why didn't the government just mandate it to be the reverse order with a "will" instead of a "may."

Also, the MPN is totally outdated. Look at section "13. Interest Rates":

Subsidized Stafford Loan and a Federal Unsubsidized Stafford Loan is a variable rate that is based on a formula established in the Act. The interest rate may be adjusted each year on July 1. As a result, my interest rate may change annually, but it will never exceed 8.25 percent.

How many years ago did the rules change to make Stafford loans have a fixed 6.8% for medical students? Why is this misleading information still there 2-3 years later?

 

[AMDFAO]

When a borrower is in active repayment (writing checks) your loan payment is calculated to be enough to cover the interest accruing over the payment period (usually 30 days). The interest on your loans is accruing every day so it's more like 6.8% / 365 days. If you owe me $1000 bucks, at 10% APR payable over 5 years then I would set your payments to be say $50 bucks per month. When I credit your payment, I first pay off the $48 dollars of interest that accrued over the 30 days and the other $2 goes on the principle. You now owe my $998. Your payment remains constant at $50 and the next payment pays off the $47 bucks in interest and $3 goes on the principle so now you owe $995. This concept is called "amortization"-- a fancy term for "how is the loan paid off". If you were in active repayment (lender is expecting a payment) and you don't pay it, they have the right to capitalize the unpaid interest and add late fees etc. The MPN (written by the feds for all the lenders) is written with the "may" clause as the lender is not required to charge you late fees or collection costs (they all do though) so the order of what your payment goes to first is listed.
The lender has the right to capitalize the interest at the end of a deferment or forbearance.
The MPN contains many clauses to "The Act" which really is the Higher Ed Act of 1965 when most of the programs were written. Since 1965 all the changes to the Act are basically amendments which change the terms of loans, increase Pell grants etc... I don't see the feds ever writing the MPN over and avoid it by adding clauses referring to "The Act" and the rules in play at the time the loan was disbursed set the terms. The rates on sub loans are different for undergrads vs grad making it even more unlikely to be rewritten. The disclosure statements that are mailed to you before the loan is disbursed should have the rate.
What you will never find in the loan note is anything to do with a lender incentive since they are outside the scope of the legally binding loan note (or contract) you entered into. As long as the language was displayed on the page when you signed the MPN, the lender is legally in their right to discontinue the benefit and you can be sure their legal department went over their disclaimer with a fine tooth comb.
Don't be too suprised if the lender rep seems a bit befuddled-- it's pretty normal. I tell my kids that no one grew up wanting to work in loan servicing so it's not their career; it's their job. You could also easily conclude that Discover is new to the game so they don't have all that much experience.

 

[Guile]

^^^ This is right on.

 

[loved]

^^^ This is right on.

agreed.

 

[Hysteria24]

So... after all that, is Discover still as good as it sounds when compared to other lenders?

 

[FenixTx]

a

 

[MassTransport]

Discover was the best in terms of up-front costs, since they're definitely the only one I found that covers the origination and default fees. My school's finaid office was hesitant to recommend them because they may not be around later, and whoever the loans are sold to might not honor the 0.25% repayment incentive. If you shop around, there are banks that offer greater repayment rewards that will ultimately cost less than Discover, but if you want the payout now, Discover would be it.

I agree that they're not very knowledgeable on the phone. The representative I spoke with had trouble understanding what a guarantor was (alarmingly). I ended up going with another lender.

Discover just felt unstable to me. If your school offers a guarantor, check to see if they cover the upfront fees, because some will. If they do, even if they only cover some, I would recommend going with somebody else that offers the 0.25 and eating any fees left over.

 

[plauto]

I say just take the savings upfront since they're the only savings you'll positively get. Later on the market is going to be different and you might end up consolidating and changing companies anyway.
As far as Discovery disappearing...after the recent market events never say never. However they have a strong presence in the CC business and they are not going anywhere as a company. And, contrary to Chase and a couple other companies, the reps on the phone actually speak English and are sitting in a US office

 

[joshkolb]

I called Discover today and made sure everything was double-checked with the trainer who was on-site, so I assume this is the best info they have.

1 - They said the loans cannot and will not be sold.
2 - Interest is capitalized monthly, but still 6.8% APR.

MassTransport - you say there are others that are better if you shop around. I haven't found any yet - care to name some alternatives?

 

[plauto]

I've been reading a lot lately about interest being capitalized differently among loan companies....please correct me if I am wrong, but since Stafford loans are government regulated, doesn't that mean that the terms (except bonuses if any) are the same no matter the company?
Which means that they all have to calculate interest the same way.
Right?

 

[Hysteria24]

... and whoever the loans are sold to might not honor the 0.25% repayment incentive. If you shop around, there are banks that offer greater repayment rewards that will ultimately cost less than Discover...

MassTransport - you say there are others that are better if you shop around. I haven't found any yet - care to name some alternatives?

I agree. There are not many (if any) companies out there offering anything that a 0.25% rate discount for setting up some kind of automatic payment. Additionally these other companies are charging origination and default insurance fees (unlike Discover).

I see no other company out there that has a better deal going (except for that one company for PA residents, "National" I think.)

 

[loved]

Hey plauto, this is something that I am also confused with, too. I thought it was government regulated. However, I haven't been able to confirm it with any lender. The closest answer I received was from EdAmerica; in answer to my question, the rep. said, "at repayment and at the end of forbearance/deferment periods... I am pretty sure that it is something that is government regulated." Argh! The frustration ensues!

Hey Hysteria24, it is National City for PA students.

Hey joshkolb, in response to the answer you received from Discover in terms of interest capitalized monthly... I received this same answer (monthly) when I called them the 1st time, and then another answer (at repayment) when I called them a 2nd and 3rd time.

 

[Hysteria24]

Hey Hysteria24, it is National City for PA students.

No... I am pretty sure anyone can use them, only they have some pretty good perks going right now that are only available to PA residents.

 

[MassTransport]

I ended up with Citibank. They advertise a 0.5% interest reduction at repayment and an optional 0.25% with autopay. My guarantor absorbed the default fee, so I felt comfortable eating the 1% origination fee.

 

[FenixTx]

sfg

 

[loved]

No... I am pretty sure anyone can use them, only they have some pretty good perks going right now that are only available to PA residents.

Agreed. That's what I meant--anyone can use them. My statement was confusing.

 

[MassTransport]

What exactly does the default fee refer to?

The default fees go into funds that guarantors use to reimburse lenders when one of their student borrowers default and can't pay. Each guarantor has to maintain this fund by law.

 

[joshkolb]

I called Citibank and asked about guarantors absorbing default fees and they said that mine wouldn't. I'm not sure if that means most do or most don't, but for anyone else reading this or considering Citibank, you may want to ask about your specific school.

 

[rgerwin]

Yes, every guarantor has a different policy regarding default fees. Mine charged it, and so it would have been 2% off the top. I switched to discover. The thing about the fees is that they take it from your funds, giving you less living funds. That stinks.

 

[phungy]

Yes, every guarantor has a different policy regarding default fees. Mine charged it, and so it would have been 2% off the top. I switched to discover. The thing about the fees is that they take it from your funds, giving you less living funds. That stinks.

So the no fees with Discover is taken from the amount they give us?
ex. $8,500 - 2% = $8330?

 

[rgerwin]

Well, alot of people will take out the max, which is about $42K. So 2% of that is $840.

 

[Hysteria24]

The thing about the fees is that they take it from your funds, giving you less living funds.

I'm pretty sure this is untrue. Hypothetically, if you take out a loan for $50,000 they will give you the $50,000 (so you gave the same amount of "living funds") but they will calculate the up front fees and add them to the principle. So in reality the $50,000 loan instantly turned into a ~$51,000 loan.

This goes with maxing out loans as well. You can take out the maximum amount of money available based on your school's cost of attendance. You will get the entire amount, but the loan fees will be added to the principle.

 

[MassTransport]

I'm pretty sure this is untrue. Hypothetically, if you take out a loan for $50,000 they will give you the $50,000 (so you gave the same amount of "living funds") but they will calculate the up front fees and add them to the principle. So in reality the $50,000 loan instantly turned into a ~$51,000 loan.

This goes with maxing out loans as well. You can take out the maximum amount of money available based on your school's cost of attendance. You will get the entire amount, but the loan fees will be added to the principle.

No, the origination and default fees are removed from your loan disbursement and will not add on top of your principal.

 

[loved]

My financial aid office told me that orig. and def. fees are removed from loan disbursement, so you have to request a loan amount with that in mind.

 

[Hysteria24]

Ok, so maybe what I meant was that if a school says the COA is $200,000, each student is only allowed to borrow from the federal government up to the $200,000 mark.

There was concern that if a student borrows $200,000 then origination fees would eat up a chunk. However you can technically borrow over your max limit so that after the upfront fees, it comes out to $200,000 in your pocket. Thus no need to worry about up front fees cutting into "living funds."

However the extra that you borrow to cover those fees are added to the principle.

 

[MassTransport]

Technically, you can't borrow federal loans beyond your cost of attendance (your max limit). What actually happens is that some schools may include the origination and default fees in with the cost of attendance. In that case, the fees are in the principal, not added on top of it.

Bottom line, your fees are removed from your disbursement before they get to you. Whether or not your disbursement includes the origination and default fees will depend on how your med school calculates the CoA and not on the government or your personal preference.

 

[rgerwin]

I definitely got over $400 dollars more back than originally planned from the lack of fees. What my FA office said is they can easily increase your GRad Plus/supplemental, but not your staffords.

 

[phungy]

The subsidized Stafford loan interest rate just dropped to 6.0% while the unsubsidized remains at 6.8%.

 

[Guile]

The subsidized Stafford loan interest rate just dropped to 6.0% while the unsubsidized remains at 6.8%.

Do you have a link?

 

[phungy]

Do you have a link?

http://www.discoverstudentloans.com/student/stafford.aspx

6.0% fixed (subsidized loans)
6.8% fixed (unsubsidized loans)

 

[Guile]

Yeah, those rates are for college students. Here's the page for grad students:

http://www.discoverstudentloans.com/student/grad-student.aspx

I thought originally you meant Congress had changed the rate. I was a little excited.

 

[phungy]

incorrect. subsidized stays at 6.8% for graduate students. it's only 6.0% for undergrads. look it up.

Oh wow. I asked a Discover rep 2 days ago what the interest rates were after he looked at my account. He told me 6.0% for subsidized and 6.8% for unsubsidized, I guess he didn't know if was different for undergrad/graduates. Darn it, 6.0% would have been nice

 

[alum]

True that. I wonder when Congress is lowering the rates for next year... Finding a good lender is hard. Anyone know how to determine (search engine/websites) which bank is offering the best rates with the best rate reductions? Thanks in advance.

people working the phones or the front desks usually aren't too smart/knowledgeable.

you can find better info yourself online.

 

[SupraDOc]

Well it's been almost a year since this thread has been created and they still have no fees for stafford loans as of July 1, 2009 and the fixed rate of 8.25% is still lower than most for grad PLUS.

Any feedback on Discover as a lender?

 

[Guile]

Well it's been almost a year since this thread has been created and they still have no fees for stafford loans as of July 1, 2009 and the fixed rate of 8.25% is still lower than most for grad PLUS.

Any feedback on Discover as a lender?

You'll probably start to get more replies when current medical students have gotten their aid packages back and have to pick a lender. It's still early.

 

[SupraDOc]

You'll probably start to get more replies when current medical students have gotten their aid packages back and have to pick a lender. It's still early.

That is true but I was hoping to see if any of the people from last year could share some last minute feedback before I finalize my decision to pick Discover.

 

[TMP-SMX]

Discover was new last year with student loans. They are fine for my staffords but we won't know how it all works until repayment. Though by then it has to do with the loan servicer.

Just find a lender with the lowest fees.

 

[Bleurberry]

I just talked to Discover (I called twice to make sure) They said no fees even after July 1 and 8.25 on Grad plus. They also will not sell your loan. They have only been in the student loan market 1 1/2 year. How long will they be here? maybe they hope to make money on their credit cards?? anyone else want to chime in??

The handler for their loans (staffords) is Great Lakes, which has been around for 40 years, and has a pretty good reputation from what I could see.

 

[Bleurberry]

Ok guys,

I'm a PA resident and I thought, hell, I signed with Discover but if the above info was right, I'll switch over today.
Well I called National City and the previous posted info in this thread is not correct. They offer one 0.25% discount for regular payments, but they do have an origination and default fee, so discover remains the only good guy. It didn't sound right to be after I found out National City was bought by PNC, because I'm familiar with PNC's current rates (They were my previous financeer for staffords) and why would National City have different rates? Well, the answer is they wouldn't, and they don't, according to the guy I spoke with this morning. Oh well!