Loan Consolidation Thread - Very Important Information

[Goofy]

I think anyone who is considering in loan consolidation should take a real good look at this process immediately.

There is a very strong lobby in Washington attempting to eliminate the consolidation program, backed by the evil Salli Mae.

What Sallie Mae is attempting to do, is make government loans hinge on variable rates. With rates at historical lows, this legislation has the possibility of costing us tens if not hundreds of thousands of dollars over the life of the loan.

We are in at a historically great time to consolidate with record low interest rates, almost 2% lower than last year. Consolidating now will lock in this rate regardless of what happens in Washington.

Under normal circumstances, we would probably be better off waiting until July, as rates may dip further, but this lobby is quite powerful and aggressive, and the amendmant just might pass before than. It's a long shot, but if it does go through, we will get screwed out of a small fortune.

I encourage everyone to share links, news, info, expertise in navigating a process that can save us quite a bit of money. I will update this post with relevant links as necessary.

Thoughts?

Important Thread Related Links:

--Sallie Mae Online Consolidation Application
<a href="https://selfservice.salliemae.com/LoanConsolidation/content/" target="_blank">https://selfservice.salliemae.com/LoanConsolidation/content/</a>

News Sources:
<a href="http://www.nytimes.com/2002/04/28/national/28LOAN.html" target="_blank">http://www.nytimes.com/2002/04/28/national/28LOAN.html</a>
<a href="http://www.usatoday.com/usatonline/20020425/4058508s.htm" target="_blank">http://www.usatoday.com/usatonline/20020425/4058508s.htm</a>
<a href="http://www.cnn.com/2002/ALLPOLITICS/04/29/bush.congress.spending.ap/index.html" target="_blank">http://www.cnn.com/2002/ALLPOLITICS/04/29/bush.congress.spending.ap/index.html</a>
<a href="http://www.cnn.com/2002/fyi/teachers.ednews/05/01/budget.college.reut/index.html" target="_blank">http://www.cnn.com/2002/fyi/teachers.ednews/05/01/budget.college.reut/index.html</a>
<a href="http://www.macon.com/mld/macon/news/politics/3174253.htm" target="_blank">http://www.macon.com/mld/macon/news/politics/3174253.htm</a>
<a href="http://story.news.yahoo.com/news?tmpl=story&u=/ap/20020501/ap_to_po/bush_student_loans_1" target="_blank">http://story.news.yahoo.com/news?tmpl=story&u=/ap/20020501/ap_to_po/bush_student_loans _1</a>

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[Sevo]

•••quote:•••Originally posted by Klebsiella:
•Attention fourth years, there is compelling evidence that loan consolidation is a good move. Lets use this thread to share advice, links, experiences with each other.•••••I'm getting the feeling that it would be better to consolidate after July 1st. The chances of the FOMC raising rates anytime soon are next to nil.

 

[Bovie2Me]

The financial aid advisor at my school advised me to consolidate prior to graduation (end of May) to get an additional discount on the rates, but the rep I spoke with at Direct Loan Consolidation wasn't aware of any such break. Does anyone have any information why it would be advantageous to consolidate prior to graduation (especially since it appears the rates may likely drop further in July)?

 

[Sevo]

•••quote:•••Originally posted by Bovie2Me:
•The financial aid advisor at my school advised me to consolidate prior to graduation (end of May) to get an additional discount on the rates, but the rep I spoke with at Direct Loan Consolidation wasn't aware of any such break. Does anyone have any information why it would be advantageous to consolidate prior to graduation (especially since it appears the rates may likely drop further in July)?•••••That doesn't make any sense to me. Interest rates have fallen since last July, and furthermore, you will still be in your grace period until late Fall. You shouldn't lose your "in-school" rate until October/November.

 

[LaCirujana]

My understanding was that consolidation at this point would make you ineligible for the financial hardship deferment--am I misinformed? I'd love to be able to take advantage of lower interest rates and consolidate, but I'm in a 7 year program, so I need to watch what I do in order to defer as long as possible (and then forbear, which I know I can do post-consolidation, but only for an additional 3 years). Anyone have info/advice?

 

[Jim Picotte]

Surg, you can consolidate all but one loan (leave something out) and still be able to take advantage of an extra 3 years of deferment. Also remember, if you consolidate all that interest that has been building will be compounded. Of course once your grace period is over it would be compounded anyway, but some people try to pay off some of it during that small 6 month grace period.

 

[Goofy]

Surg,

According to my research, deferrment is not a problem with consolidation at all. The only catch is that you will need to continue to fill out financial hardship forms.

When I initially embarked on the quest towards consolidation, a lot of my classmates stated the inability to defer as the reason for not consolidating. I have since learned this is not the case, and that consolidating is a fantastic idea.

There is one very strong reason to consolidate ASAP, and I was wondering if anyone knows about this. Apparently Sallie Mae is sponsoring a bill to eliminate our ability to consolidate. These evil little org is insisting variable rates are better for the government. They are. But they will cost us a ton. Additionally, it seems that the Bush administration is buying it, meaning that if we wait any longer to consolidate, we may not be able to lock in the historical rates.

I'm gonna go ahead and consolidate, as I don't believe rates will go much lower. Although I still have until July to do so, if this legislation gets fastracked, it will cost me tens of thousands of dollars extra over the course of my loan.

I think there are compelling reasons to get this done as quickly as possible.

Thoughts?

 

[gem777]

I, too, have heard about a bill in Congress pertaining to financial aid repayment, except my understanding is that the bill's goal is to overhaul the formula used to determine the annual interest rate. Apparently, the Feds are dissatisfied with the current formula because it may produce an interest rate of around 4% this July.

Regarding consolidation, many people are suggesting that borrowers wait until July to consolidate because the interest rate is expected to be so low. I am very interested in learning more about how consolidation affects one's ability to obtain a deferment. I also thought that if you consolidate, you lose your ability to defer. I would be very pleased if I am wrong about that!

If your interested, here is a link to a USAtoday.com article on the subject.

<a href="http://www.usatoday.com/usatonline/20020425/4058508s.htm" target="_blank">www.usatoday.com/usatonline/20020425/4058508s.htm</a>

 

[Goofy]

Hi Gem,

It is true that waiting until July might very well yield a somewhat lower rate, but if this legislation does go through by then, we will have lost perhaps the worst bet of our lives, as the anti-consolidation lobby is pressing very hard to eliminate this program quickly.

Here is a nice article from the NyTimes on the issue.

<a href="http://www.nytimes.com/2002/04/28/national/28LOAN.html" target="_blank">http://www.nytimes.com/2002/04/28/national/28LOAN.html</a>

 

[Goofy]

•••quote:•••Originally posted by Bovie2Me:
•The financial aid advisor at my school advised me to consolidate prior to graduation (end of May) to get an additional discount on the rates, but the rep I spoke with at Direct Loan Consolidation wasn't aware of any such break. Does anyone have any information why it would be advantageous to consolidate prior to graduation (especially since it appears the rates may likely drop further in July)?•••••Bovie,

See my other posts. The pending legislation is one hell of a reason in my opinoin.

 

[Sevo]

•••quote:•••Originally posted by Klebsiella:
• •••quote:•••Originally posted by Bovie2Me:
•The financial aid advisor at my school advised me to consolidate prior to graduation (end of May) to get an additional discount on the rates, but the rep I spoke with at Direct Loan Consolidation wasn't aware of any such break. Does anyone have any information why it would be advantageous to consolidate prior to graduation (especially since it appears the rates may likely drop further in July)?•••••Bovie,

See my other posts. The pending legislation is one hell of a reason in my opinoin.•••••Klebsiella,

Before you send your application in to your loan servicer, maybe you should take a look at this article first:

<a href="http://www.cnn.com/2002/ALLPOLITICS/04/29/bush.congress.spending.ap/index.html" target="_blank">http://www.cnn.com/2002/ALLPOLITICS/04/29/bush.congress.spending.ap/index.html</a>

I like this part from Daschle's office: "This is a proposal that Senate Democrats strongly object to, and it will not become law."

 

[attie]

Published on Wednesday, May 1, 2002 by Reuters White House Yields to Democratic Pressure on Student Loans

WASHINGTON - The Bush administration backed away on Tuesday from a proposal to curtail a popular student loan program, saying it would look at other ways to save money after Democrats charged that the plan would make it more expensive for millions of Americans to attend college. Currently, college students can consolidate their education loans at a low, federally subsidized, fixed interest rate.

But under a proposal outlined last week by the White House budget office, consolidated loans would be offered at variable rates, making them less attractive to borrowers and less costly for the government.

Administration officials estimated the budget savings at $1.3 billion, enough to replenish the Pell Grant program for low-income students.

But administration officials, faced with opposition from Democrats and some Republicans, conceded the proposal was going nowhere.

"We're looking for other ways to fund the Pell Grant program," said one official.

Democrats had warned that doing away with fixed-rate loans would penalize poor and middle-income students who depend on low-interest-rate loans to
pay college expenses.

"We believe strongly that our government should make it easier for low-and middle-income students to attend college, not harder and more costly,"
Sen. Edward Kennedy of Massachusetts and 45 other Senate Democrats said in a letter to Bush on Tuesday.

"Therefore, if this proposal is put forward, we would strongly oppose it,and we urge your administration to withdraw this unwise plan."

Copyright ? 2002 Reuters Limited

 

[Goofy]

Sevo and Attie,

I appreciate the information. This is a process I am going to follow very closely. I remain wary of placing any faith in these groups to protect me.

Some more info on the process:

-Consolidation - You cannot consolidate your loans until the last day of attendance. This means you can consolidate, in some cases before graduation. For most of us, this day is somewhere in the middle of May. This is the absolute earliest day to consolidate.

-Interest Rates - With interest rates scheduled to decrease in July, it would normally be prudent to wait until July 1 to consolidate to lock in the lower rate. Most likely we will be able to get this rate come July 1st, but with government lobby meddling in our finances, we need to be extra vigilant. If this legislation is passed prior to July 1st, those who choose to wait will effectively be screwed out of a rather large sum of money. This is the reason I am giving strong consideration to consolidating as soon as possible.

-Loan Deferrment - It is possible to defer loan payments even after consolidation. There are three big ways to do this. You can request a Hardship deferment (the best option), a hardship forbearance, or a intership/residency forbearance. Once your consolidation paperwork comes through, you will need to apply for one of these deferment programs, as the grace period for repayment is immediately eliminated.

-Private Loans - The consolidation process doesn't apply to the private loan of your balance. If you have taken out any private loans you can contact salli mae for the breakdown. You will have a three year grace period for these loans after graduation. Once that grace period is up, you can request a residency deferment, seperate from the consolidation deferment above.

I cant consolidate until mid May anyway, so for the next two weeks, I will be vigilant to developments in Washington to determine whether I act to lock in a slightly higher rate earlier than July.

 

[digimon]

looks like bush has decided to back off...
<a href="http://www.cnn.com/2002/fyi/teachers.ednews/05/01/budget.college.reut/index.html" target="_blank">http://www.cnn.com/2002/fyi/teachers.ednews/05/01/budget.college.reut/index.html</a>

fixed rates look safe for the time being...