- Joined
- Apr 20, 2006
- Messages
- 42
- Reaction score
- 0
Graduate Leverage's loans are funded by AES. When I log into my account, it is on AES' computer system. GL is basically acting like a sales arm for AES in my opinion.
SleepIsGood said:Could anyone tell me WHY I should NOT consolidate with Graduate Leverage (in plain english )
MeowMix said:OK, here is the catch with Grad Lev, using my loans as an example. I have 2 more years of school before residency starts.
My 2004-05 loans are consolidated at 2.875% with Direct Loans. When I consolidate with Grad Lev, the rate on those loans goes up to 3.91% until I go into repayment. Then it goes down to 2.88%, and after 3 years, to 1.88%. My 2005-06 loans start at 3.91% and then drop the same way.
If I do not include the 2004-05 loans in my consolidation with grad lev, then my 2004-05 loans stay consolidated with Direct Loans at 2.875%, but the rate for my 2005-06 consolidation with Grad Lev would be 4.5% (incl 0.25% discount for electronic payments). That would drop to 3.5% after 18 months of repayment.
So the calculation is quite complicated in trying to figure out which option is most economical. It depends a lot on how many years you think you will be in forbearance before starting repayment, how much sub vs unsub Stafford, etc., and there are some nuances about forbearance etc. that are too complicated to get into here.
magicrat said:Below is a letter/Offer I received from GL. My concerns are listed here, 1-8. They are highlighted in the letter below in red.
1.)Collective Bargaining is written as if the deal they have is fluid. They have a product and volume isn't changing that.
2.)SAF is a non-profit. Almost every company I have looked at deals with a non-profit/State agency. ie. AES
3.)"Under your curent lender you have lost your grace period" My current lender?, if I chose to consolidate with my current lender they would make arrangements for a grace period
4.)"This is not a timely payment incentive and therefore it cannot be lost in the future. The only requirement is the borrower must set up electronic payment processing." Who would set up electronic processing to send funds late. So if I had a screw up with my bank (moved, changed banks, new job changed my direct deposit) I lose my benefits? Even if I sent a payment in on time that wasn't electronically processed?
5.)1% rate reduction is given with "timely' payments. If I am late I lose the benefits.
6.)True Rate Reduction. They obviously want you to extend the length of the loan.
7.)Loan Sale restriction side letter. Selling off loans appears to be a bit of an urban myth. If one consolidates through a big operation, Sallie Mae, AES, etc. the loans are not going anywhere.FAO offices use this boogeyman to send people to their own preferred lenders who are typically using the same exact servicers.
8.)Borrower Benefit Contract; Similar to above. An additional contract on top of the actaul consolidation (which is a contract) means little. It could also be read that they retain their right to pull your benefits for late payments
1.) Our Negotiated Consolidation Deal & Potential Savings
Bonnie, we are pleased to report that over 20,000 graduate students have entered our system for a consolidation recommendation this year. This increase in numbers has strengthened our collective bargaining and as a result we have improved upon our negotiated rate incentives. The details of these terms are listed in section two, but we wanted to take a moment to highlight the opportunity we have negotiated. If you proceed with our recommendation your consolidation will be processed by Student Assistance Foundation (SAF). SAF is a non-profit state agency which has originated more than $2 billion in federal student loans. SAF has been in business since 1980 and through its non-profit status has been able to provide students with superior loan terms. All loans will be originated by US Bank and funded by Brazos Higher Ed.
The primary reason we selected this lender and servicer was based on their willingness to offer the greatest rate discount. In addition to the standard 1% rate reduction for timely payments, they will lock-in all new loans at your previous year's consolidation rate. Therefore the loans you took out this year will be reduced from 4.7% to 2.875%. This deal presents significant savings and is unique to borrowers using our service. Lastly, in addition to the rate incentive, SAF will give you the ability to preserve your grace period. Under your current lender you have lost your grace period, and therefore this is the only approach which would allow you to reinstate it.
2.) Loan Terms
1. New Loan Rate Reduction: Lender will consolidate all new 4.7% loans at borrower's previous consolidation rate (2.875% for most). This is not a timely payment incentive and therefore it cannot be lost in the future. The only requirement is the borrower must set up electronic payment processing.
2. Perkins Rate Reduction: All Perkins loans consolidated will be reduced to your prevailing Stafford rate. This will result in significant interest savings as Perkins loans are fixed at 5.0%.
3. 1% Rate Reduction for Timely Payments: In addition to the new loan rate reduction, all loans will be reduced a further 1% after 36 timely payments. You should note that this incentive is based on timely payments (and not consecutive payments), and therefore deferment and forbearance do not affect the incentive.
4. Grace Period Retention: Borrowers will retain their full six month grace period.
5. True Rate Reduction: Once your incentive is attained, your monthly payment will be reduced commensurately. Most lenders maintain the same monthly payment which results in a shorter loan term. By lowering the payment you will be able to use the excess funds for other purposes.
6. Loan Sale Restriction Side Letter: Lender has agreed to forgo the option to sell loans consolidated through our service. We think this is particularly important to ensure accountability and loan terms.
7. Borrower Benefit Contract: SAF has also agreed to legally restrict its ability to change any rate incentive achieved. Given this, you will have legal recourse if your rate incentive were removed.
theLoanster.com uses the same tried and true companies that GL uses (AES, US Bank) but not the newer, unproven ovne (Brazos). They also have a "you earn it -Keep it" promise. Once you earn your benefits they CAN'T be taken away. The cost of their loan is about .15% more, however, they also recommend paying off the loan as soon as possible as opposed to GL. This would obviously even out the difference in cost. Let alone if you were to lose your benefits through GL for a single late payment.
All in all, I have had "life" happen in the past; I feel much safer with a loan that guarantees I won't lose all the benefits after I have earned them. (Not to mention you have 14 days grace for lateness) So I am going with theLoanster
magicrat said:Below is a letter/Offer I received from GL. My concerns are listed here, 1-8. They are highlighted in the letter below in red.
1.)Collective Bargaining is written as if the deal they have is fluid. They have a product and volume isn't changing that.
2.)SAF is a non-profit. Almost every company I have looked at deals with a non-profit/State agency. ie. AES
3.)"Under your curent lender you have lost your grace period" My current lender?, if I chose to consolidate with my current lender they would make arrangements for a grace period
4.)"This is not a timely payment incentive and therefore it cannot be lost in the future. The only requirement is the borrower must set up electronic payment processing." Who would set up electronic processing to send funds late. So if I had a screw up with my bank (moved, changed banks, new job changed my direct deposit) I lose my benefits? Even if I sent a payment in on time that wasn't electronically processed?
5.)1% rate reduction is given with "timely' payments. If I am late I lose the benefits.
6.)True Rate Reduction. They obviously want you to extend the length of the loan.
7.)Loan Sale restriction side letter. Selling off loans appears to be a bit of an urban myth. If one consolidates through a big operation, Sallie Mae, AES, etc. the loans are not going anywhere.FAO offices use this boogeyman to send people to their own preferred lenders who are typically using the same exact servicers.
8.)Borrower Benefit Contract; Similar to above. An additional contract on top of the actaul consolidation (which is a contract) means little. It could also be read that they retain
their right to pull your benefits for late payments
1.) Our Negotiated Consolidation Deal & Potential Savings
Bonnie, we are pleased to report that over 20,000 graduate students have entered our system for a consolidation recommendation this year. This increase in numbers has strengthened our collective bargaining and as a result we have improved upon our negotiated rate incentives. The details of these terms are listed in section two, but we wanted to take a moment to highlight the opportunity we have negotiated. If you proceed with our recommendation your consolidation will be processed by Student Assistance Foundation (SAF). SAF is a non-profit state agency which has originated more than $2 billion in federal student loans. SAF has been in business since 1980 and through its non-profit status has been able to provide students with superior loan terms. All loans will be originated by US Bank and funded by Brazos Higher Ed.
The primary reason we selected this lender and servicer was based on their willingness to offer the greatest rate discount. In addition to the standard 1% rate reduction for timely payments, they will lock-in all new loans at your previous year's consolidation rate. Therefore the loans you took out this year will be reduced from 4.7% to 2.875%. This deal presents significant savings and is unique to borrowers using our service. Lastly, in addition to the rate incentive, SAF will give you the ability to preserve your grace period. Under your current lender you have lost your grace period, and therefore this is the only approach which would allow you to reinstate it.
2.) Loan Terms
1. New Loan Rate Reduction: Lender will consolidate all new 4.7% loans at borrower's previous consolidation rate (2.875% for most). This is not a timely payment incentive and therefore it cannot be lost in the future. The only requirement is the borrower must set up electronic payment processing.
2. Perkins Rate Reduction: All Perkins loans consolidated will be reduced to your prevailing Stafford rate. This will result in significant interest savings as Perkins loans are fixed at 5.0%.
3. 1% Rate Reduction for Timely Payments: In addition to the new loan rate reduction, all loans will be reduced a further 1% after 36 timely payments. You should note that this incentive is based on timely payments (and not consecutive payments), and therefore deferment and forbearance do not affect the incentive.
4. Grace Period Retention: Borrowers will retain their full six month grace period.
5. True Rate Reduction: Once your incentive is attained, your monthly payment will be reduced commensurately. Most lenders maintain the same monthly payment which results in a shorter loan term. By lowering the payment you will be able to use the excess funds for other purposes.
6. Loan Sale Restriction Side Letter: Lender has agreed to forgo the option to sell loans consolidated through our service. We think this is particularly important to ensure accountability and loan terms.
7. Borrower Benefit Contract: SAF has also agreed to legally restrict its ability to change any rate incentive achieved. Given this, you will have legal recourse if your rate incentive were removed.
theLoanster.com uses the same tried and true companies that GL uses (AES, US Bank) but not the newer, unproven ovne (Brazos). They also have a "you earn it -Keep it" promise. Once you earn your benefits they CAN'T be taken away. The cost of their loan is about .15% more, however, they also recommend paying off the loan as soon as possible as opposed to GL. This would obviously even out the difference in cost. Let alone if you were to lose your benefits through GL for a single late payment.
All in all, I have had "life" happen in the past; I feel much safer with a loan that guarantees I won't lose all the benefits after I have earned them. (Not to mention you have 14 days grace for lateness) So I am going with theLoanster
flyer12 said:As an example of deciding this way, I used my own situation (a situation that a lot of 4th year medical students are in). The bottom line is that assuming I get all of the borrower benefits and pay my loan off over 30 years, I will save about $13,700 over the next 30 years consolidating with GL rather than AES. To me, this amount seems like peanuts and I would rather know what I am getting into with AES than take a gamble to save such a trivial amount. You may think differently and the numbers will be different (perhaps substantially) depending on your situation. The point is the process; make your decision using the information you have and don't guess about what you don't know.
MedMan2005 said:Oh and did anybody see that 60 minutes thing on sallie mae. Apparently the largest Tried and True company out there. I mean i have seen some corrupt huge companies.
I may be wrong, but I think the loanster just came on the scene this year, never heard of them outside of this forum. Not sure though
Yes theLoanster.com did come out this year...GL came out the year before that. Does not mean much, they are both marketers not loan holders.
Check the background of the guy running theLoanster.com...FirstMarblehead. The background for GL was nada.
magicrat said:MedMan2005 said:Oh and did anybody see that 60 minutes thing on sallie mae. Apparently the largest Tried and True company out there. I mean i have seen some corrupt huge companies.
I may be wrong, but I think the loanster just came on the scene this year, never heard of them outside of this forum. Not sure though
Yes theLoanster.com did come out this year...GL came out the year before that. Does not mean much, they are both marketers not loan holders.
Check the background of the guy running theLoanster.com...FirstMarblehead. The background for GL was nada.
MedMan2005 said:In response to your points
1) Volume has a large impact on deals. If a lender is making less of a profit margin on each consolidate, they would be less inclined to give those benefits unless they would make up for it with volume. True once the deal is done volume would have nothing to do with it with the contract or terms, however it would be impossible to negotiate the deal without the volume
Your point would be valid if GL hadn't used this same argument last year with no previous volume
2) I dont know what kind response would have value here
3) Performing an in school consolidation means you will lose your grace period. Your lender, in this case Brazos, will not expect payment until 6 months after graduation and also will pay the interest on your subsidized loans.
I'm not performing an in-school consolidation
4) This is saying you can never lose your rate reduction down to 2.875%. If for some reason you take electronic payment off and are late on a payment and then sign back up for it, you would still have your rate reduction down to 2.875%
The letter states that Electronic Funds transfer is a requirement! There is no definition of requirement. You make it seem that requirement is simply a term thrown around for no reason whatsoever. Hmm
5) Being on time for the 1% reduction is industry standard except for apparently the loanster, who i have never heard of before this year.
Love when you use this argument to pimp a 2 year old company.
6) Who wouldnt want to extend their term. These are negative real interest rates. It helps you to keep the loan out as long as possible because you are are accruing interest at a lower rate than the inflation rate. How can that be a bad thing?
Debt as investment is fine.Just don't screw it up.
7) This is in no way an urban legend that lenders sell loans.
Ask FAO offices, they love to propagate this myth
8) the only benefit that could be lost, as with the majority of companies, is the 1% reduction(except for again apparently the loanster company). You cannot lose your interest rate reduction down to your previously consolidated rate.
Only the 1% reduction?!? So you don't mind paying 35% more over the life of your loan? Good position to be in.
Talk amongst yourselves
MedMan2005 said:You forgot to end your argument by plugging the loanster website again.
gostudy said:Thinking of 13,700 as strictly 13,700 is shortsighted. That 13,700 can be invested.
flyer12 said:To have a better idea of exactly how I could get screwed if something shady is going on with GL, I asked my financial aid officer about worst case scenerios. He said there are two issues (I agree with abbaroodle about potential FAO conflicts of interest. However, I dont think the FAO at my school would blatently lie, and the concepts apply to all loan companies anyway). So here is what he said about GL; granted, number two is probably a remote possibility, but I clarified it with him extensively.
1) The wording of their agreement is vague and, upon entering repayment, you may find that they have used some loophole allowing them to set your interest rate higher than you thought it was going to be. The actual cost to you depends on exactly what happens, but the certainty is that they would still have to honor the promissory note which sets the interest rate at the weighted average of all loans being consolidated. If calculating the cost of your loan, it would make sense to see how much the loan would cost you if you somehow lost all of your borrower benefits. This cost should be the same for all companies, but it is less likely with a well established company that has a track record of honesty. Anyway, the interest rate determined as the weighted average of all loans being consolidated can safely determine your cost in the worst case scenerio.
2) The companies they work with do not necessarily seem to have proven track records and are giving you a deal that may be too good for them to honor. I see what the language in the promissory note says, but I am told by the financial aid office at my school that in the event of a bankruptcy at the company financing your loans there is a risk that they will be sold and assigned THE PREVAILING MARKET INTEREST RATE at the time they are sold. I do not know how this works, but appearently it is a risk despite the wording of the promisory note. This could cost you a lot of money if it would happen. Furthermore, this situation is less likely with a well established and well funded company. However, there is some contention on this web site whether this is a possibility, please verify independently and let me know what you find out.
HA123 said:Trying to clear up point number 2. All of the advisors (I didn't talk to our Fin Aid Office, since they're useless) I've spoken to have said the consolidated loan cannot be sold at the "prevailing market interest rate" because the terms in the Promissory Note cannot be changed. I emailed the federal student aid program (www.studentaid.ed.gov), my question and their brief reply follow. Let us know if anyone else has any other info. Thanks.
Question:
Regarding the federal loan consolidation program:
according to the promissory note, a lender can sell a consolidation loan.
however, if this occurs, is it possible for the interest rate to exceed the
weighted average of consolidated loans at the time of consolidation (ie 5/06
for me)? I have heard rumors that a lender who goes bankrupt can sell a
federal consolidation loan at the "prevailing market interest rate", which
could be much higher than the original "fixed" weighted-average. Is this
true? This seems to violate the Promissory Note contract.
Response:
Thank you for your inquiry about federal student aid.
A Federal Family Education Loan (FFEL) lender can sell a loan to another
FFEL lender, but the terms of the loan (including the interest rate) will
not change.
If you have additional questions about financial aid, application
procedures, eligibility formulas or other student aid topics, you can
contact our Federal Student Aid Information Center (FSAIC) at
1-800-4-FED-AID (1-800-433-3243). One of our customer service
representatives will gladly assist you.
We hope this information is helpful.
E-mail Unit
Student Aid on the Web
www.studentaid.ed.gov
Federal Student Aid