loan consolidation

[somdave2005]

Thanks for the info cabby.

I was looking on UHEAA's website and it lists a bunch of "partner lenders" that they use, but I'm wondering if anyone knows if UHEAA guarantees that they will not sell your loan off for the lifetime of the loan?

I'm thinking I may use UHEAA if they won't sell off the loan, but Sallie Mae is tempting because they offer decent incentives and would be convenient to use online.

UHEAA is very unlikely to sell your loan since they are themselves a secondary market like Sallie Mae (meaning they buy up other lenders loans themselves.) Unless they buy up loans and then resell them...I'm not sure if lenders can do that. Anyone know? Regardless, there is no hard "guarantee" that you lender won't sell your loan unless they give you a guarantee in writing. The graduate leverage deal is the only one I know that forced the lender to sign a contract waiving the right to sell the loan. Even then, if that Pennsylvania agency that GL recommends somehow goes under, your loans will be sold to another lender. So there are no absolute guarantees.
I chose to go with UHEAA because they have the best borrower incentives. Even though they don't amortize their loans, you can still choose the graduated payment plan to make your payments low during your first few years. Here is a Wall Street Journal article that mentioned UHEEA.

UHEEA on WSJ article

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Members don't see this ad.

 

[somdave2005]

Here's more information on consolidation in general.

Go to Fatwallet.com, go to the finances forum and read their thread on student loan consolidation.

Here's my post on Fatwallet, regarding lenders selling their loans.



"Ok guys, here is the response to the question I asked to uheaa about consolidation lenders selling their loans to other companies.

question #1: Will you sell my loans to other lenders, thereby eliminated my borrower incentives?

The CSR Terry said that since they service their own loans now (as opposed to before when they were just a guarantee agency one year ago and would sell the loans to other lenders), you will not have your loans sold and they do not have any plans of selling anyone's loans.

question #2: Will you still honor my grace period after consolidation?

Yes they will honor your grace period, all you have to do is check box 26 and put in your grace period end date. ******* here is something you guys might want to do know**** We were told by your graduate leverage lecturer to wait until May to find out the new interest rate (most likely will go up.) before consolidating our loans. Terry said that you don't have to do that with UHEAA. They will give you the lowest interest rate (whether this year's or the upcoming year's) if you check box 26, put in your grace period end date, write next to it "best rate", and make sure they get your application by July something.

Question #3: Should I include my fixed rate loans such as my Perkins loans?

We were told not to consolidate our fixed rate loans by your lecturer because they will bring up your adjusted overall interest rate for your consolidated loans. But I was thinking, what if you could get those automatic rate reductions on your Perkins loans as well...wouldn't that be a better deal? Terry's answer was that depends if you qualify for the Perkins loans forgiveness programs (you have to be in peace corp, teaching or other stuff...just check for yourself) and the size of your Perkins loans/other fixed rate loans. If you don't qualify for their forgiveness program and your Perkin's loan is small, then the weighted average of your combined loans won't change too much and it would be better to add your Perkin's loans so that you also get in on the rate reductions on your Perkin's loans as well. "

 

[somdave2005]

Another one of my post on FW. Hope this helps. :

"For those interested in lenders that likes to sell their loans, the website FinAid has lists of the top 50 originators, holders, and consolidators of loans. You can figure out who likes to sell loans by comparing the origination volume of your interested lender to the holder volume of the lender. According the finaid, the biggest sellers of loans are JP Morgan Chase, followed by Bank One, National City Bank, American Express, TIAA-CREF, and SC Student Loan Corp. These are the lenders you guys should avoid. - Dave"

Secondary market lenders

 

[BigTree]

I just called Graduate Leverage to see how long it takes for them to recommend a lender. They said they're running about 6 days now. I also asked a lot of questions about perkins and private loans. The guy was very knowledgable and seemed to have a good head on his shoulders. I was a bit unsure about them at first but feel much better after talking to one of them on the phone.

Sallie Mae might feel like a safe choice just 'cause they're so well known but keep in mind that their sister companies "Fannie Mae" and "Freddie Mac" are under a federal inquiry because of some less than honorable business practices.

 

[MTGas2B]

If your loans are only with Direct Loans, you (legally) have to consolidate with them . That's what the financial aid people told us. The big thing is to consolidate with Direct Loans now and you'll still get to keep your 6 mo grace period which means you don't have to worry about the pesky deferrment paperwork until October. Also, if you only have Direct Loans, you can consolidate over the phone, which takes like, 10 minutes.

You do not have to consolidate with direct loans if your student loans are all direct loans. We have a great financial aid officer who deals just with the med students. She gave a great talk about the whole process. The one thing she pointed out about the consolidation companies is the only about 20% of people will qualify for the discounts they offer. Also, if the company sells your loan to another company, which happens, they don't have to honor those interest rate discounts. Even if you lose those discounts, your rate won't be any worse than if you had consolidated with the government in the first place. So, you have a chance to do better without the risk of doing worse.

 

[Mirror Form]

I just called Graduate Leverage to see how long it takes for them to recommend a lender. They said they're running about 6 days now. I also asked a lot of questions about perkins and private loans. The guy was very knowledgable and seemed to have a good head on his shoulders. I was a bit unsure about them at first but feel much better after talking to one of them on the phone.

Sallie Mae might feel like a safe choice just 'cause they're so well known but keep in mind that their sister companies "Fannie Mae" and "Freddie Mac" are under a federal inquiry because of some less than honorable business practices.

After running the numbers through excel, I'm pretty sure that Graduate Leverage is offering the best deal (esp if you have perkins loans). Also, the fact that they give you paperwork guaranteeing that your loans can't be sold is very nice.

 

[spikyhairedgirl]

Anyway, all of you are right, if you have only Direct Loans as you're not legally bound to consolidate with them. However, if your lender is a FFEL lender and you only have one FFEL lender, that lender under the "single lender rule" of the Higher Education Act has the right to deny the sale of your loan to another company. I confused FFEL with Direct, sorry - they are, in fact, different but both provide Stafford loans.
There does seem to be a loophole in this, explained to me by GL folks and that essentially involves consolidating your loans in two steps - the first step involves consolidating the lowest amount possible via another FFEL lender, thus creating 2 FFEL lenders and exempting you from the single lender rule. You should check with your financial aid office to see if you fall into this category.

 

[Goose...Fraba]

Hey guys a quick question:

I called UHEAA and asked if I could consolidate my loans while I am still in school (I'm a 3rd year) and she said that federal guidelines state that they could not, and the only place that you could while you were still in school is through the dept of education.

Does that seem right to you all, as I was under the impression that you could consolidate at any time?

Goose

 

[Mirror Form]

Hey guys a quick question:

I called UHEAA and asked if I could consolidate my loans while I am still in school (I'm a 3rd year) and she said that federal guidelines state that they could not, and the only place that you could while you were still in school is through the dept of education.

Does that seem right to you all, as I was under the impression that you could consolidate at any time?

Goose

I think thats b/c you can only consolidate federal direct loans while still in school, although I may be wrong about that.

 

[GeneGoddess]

Correct. If you are IN SCHOOL, you can only consolidate with DL. And you can only consolidate with them (while IN SCHOOL) if you hold at least one direct loan. If you are IN SCHOOL and you only have FFEL loans, you cannot consolidate until you graduate. If you are OUT OF SCHOOL, you can consolidate with whomever you wish (DL, UHEAA, whoever).

 

[argh]

I think there is at least one lingering question with the graduate leverage option, at least in my situation. They got a deal allowing interest rates on Perkins loans to be knocked down to the stafford rate, which is nice. The problem for me (and everybody who'll apply for deferment once grace period is over) is that the Perkins loan is no longer subsidized during deferment once it is consolidated under a Federal consolidation program like AES or UHEAA (and not under Direct consolidation with the gov't). Subsidized Stafford loans, on the other hand, are subsidized through deferment periods in either program. I know that the solution is to just calculate how much I'd be paying in either scenario, but I thought it was an important enough point to get out there.

And another question: what interest rate would they use for unsubsidized loans in deferment? The current stafford rate (as it changes in the next few years) for unsubsidized stafford loans? Your calculated consolidation rate? And what about any Perkins loans that are consolidated and no longer subsidized?

 

[GeneGoddess]

The problem for me (and everybody who'll apply for deferment once grace period is over) is that the Perkins loan is no longer subsidized during deferment once it is consolidated under a Federal consolidation program like AES or UHEAA (and not under Direct consolidation with the gov't).

Are you sure? I plan to try and defer and I know that both subsidized Staffords and Perkins will not acrue interest while in deferment. But I've never heard that a Perkins loan, when consolidated, would acrue interest during deferment (while a sub Stafford) would not. If that's true, it's a good point to think about...

 

[argh]

ok, I just checked with with GL, and here's the news:

-yes, Perkins loans consolidated with GL/AES (or any other non-gov't lender) will accrue interest during deferment (they are no longer subsidized)
-however, the interest rate will not be 5%, but your weighted average from consolidating, and under GL/AES the Perkins is treated as a current stafford loan at 2.77% during calculation of the weighted average.
-and all unsubsidized loans will accrue at your consolidation rate during deferment, and will not change as the stafford rate changes (now that I think of it, I'm not sure if this applies to all Federal consolidation loans or just GL/AES - definitely something to check if you're not with GL/AES)

So now the only problems I can see with consolidating the Perkins are really the loss of opportunity for loan forgiveness programs, especially considering I'm doing IM, and also deferment options are better for Perkins loans than they are for Stafford or consolidation loans. But I think having my Perkins at 2.875% over 30 years as part of a much larger package is probably better than 5% over 10 years on its own. That'll take some number crunching though.

 

[GeneGoddess]

Interesting. Thanks for letting everyone know!

 

[argh]

Another thing: anybody know if those rate deductions like having .25% shaved off for electronic debiting can be used while you're in deferment, so that your deferement interest rate gets knocked down too? And if so, can you apply for something like that without entering repayment if you're going straight from grace period to deferment (extreme economic hardship in my case)? If you can't apply for that right off but are allowed to have your deferment rate reduced, it might make sense to enter repayment briefly but bail via deferment after applying for electronic debiting. all right, enough being anal about money from me today.

 

[Chimera]

How are the perkins deferment options different than those for stafford?

The reason I am asking is that previously I vaguely remember seeing one of the possible criteria for stafford consolidation deferment was concurrently being in perkins deferment.

Potentially, this could bring up a scenario that if you didn't qualify for stafford economic hardship deferment or what not, but you qualified for perkins deferment and left the perkins loans out of your consolidation loan you could get EHD for the stafford consolidation.

Am I making any sense here?

 

[argh]

How are the perkins deferment options different than those for stafford?

The reason I am asking is that previously I vaguely remember seeing one of the possible criteria for stafford consolidation deferment was concurrently being in perkins deferment.

Potentially, this could bring up a scenario that if you didn't qualify for stafford economic hardship deferment or what not, but you qualified for perkins deferment and left the perkins loans out of your consolidation loan you could get EHD for the stafford consolidation.

Am I making any sense here?

whoops. Perkins and Stafford loan deferment options are the same if you don't have any loans from before 1993. If you have any stafford loans from from before '93, you can apply for internship/residency deferment on all outstanding Stafford loans, including ones after '93. If you have pre-'93 Perkins loans, you can apply for the same deferment, but only on those Perkins loans from before '93. Post-'93 Perkins loans and those who have all their Stafford loans after '93 have to be deferred under the new borrower rules (like economic hardship, for example).

 

[prominence]

For those of you who have received the Graduate Leverage Recommendation, which repayment plan are you planning to choose? Here are the options:

1. Equal Payment Plan

2. Graduated Repayment
a. Select 2/Alternative
b. Select 5/Alternative

3. Income Sensitive Repayment Plan

4. Extended Repayment

 

[kas23]

Can anyone who has looked into Graduate Leverage tell us what their advantages are please? I would like to know if and how they can offer a lower interest rate when the interest rates are determined by the weighted averages of your loans. And if the interest rates are the same (I don't see how they can be any different than any other federal consolidation program), what are their benefits over other programs?

(Please exclude the shaving off of 0.25% for automatic electronic transfer and the decrease of 1% after 36 consecutive payments, since every program seems to offer these benefits.) Thanks

 

[argh]

The primary advantages with graduate leverage are

1. the way they do the rate reductions for electronic debiting and on-time payments. I know that you asked to exclude these, but there is an important distinction to be made here. With GL, the monthly payments are re-amortized after the rates are reduced, meaning the monthly payments are all re-calculated so that the principal paid off each month remains the same and the amount of interest paid then reflects the new interest rate. With most (probably nearly all other options, as far as I've seen), the monthly payments are not re-calculated, and so you are paying less interest but your monthly payments remain exactly the same. The extra money goes off to paying off principal. Since you're paying off principal faster, you're paying off the loan at a faster rate. This would be really great if the interest rate was high, but it's so obscenely low that you want to take as long as reasonably possible to pay the loans off because there's a significant opportunity cost to paying down such low-interest loans.

2. things are in writing, including a promise to not sell off loans that are not defaulted, a promise to keep those repayment incentives alive while you're in deferment, etc.

3. perkins loans that are consolidated are weighed at the Stafford interest rate instead of the 5% that they actually are, meaning that if you consolidate them you won't run the risk of them dragging up your overall rate by that critical eighth or quarter of a percent (depending on the size of your perkins loans). In my case, it turns out that it costs me like 100 extra dollars over 30 years to consolidate the perkins loans versus paying them off at 5% in 10 years. what's 100 dollars going to be worth in 2035? not much.

there are some other points in the deal, and they're listed in a post on the previous page. It's actually a copy-and-paste job that gives you the details as given by GL.

 

[kas23]

Thanks for the response.

However, I think the re-amortization is really going to be negligible in the long-run. At this stage of our careers, we really need low initial payments, and most of us will get that wish by stretching the repayment period to its max (30 years). Yet, if your principal plus interest doesn't re-amortize, we are looking at a shorter repayment period of about a 25 years instead of a 30 year period. I am 26 years-old right now. When I am 50 years-old, I really don't think it is going to matter to me if my loan was over 25 or 30 years long. By that time, after I have been making attending money for a while, I would have probably paid them off anyways. Currently, I just need really low payments over the next 5 years and I don't intend to spend a penny over what they ask from me, so re-amortization will not even be a factor over the next 5 years.

In terms of not selling the consolidated loan off, any reputable company (like Sallie Mae) will be very, very unlikely to do this. The companies that we get mail from everyday will likely sell them off.

Your point about weighing the Federal Perkins loan as 2.77% is very valid, especially for people who have a high percentage of Perkins loans. My total loans are 13% Perkins loans and if I had a my Perkins loans counted as 2.77%, this would drop my consolidated rate down to 2.875% from 3.125%. This translates into a $3,236 savings IF I decide to truly pay my loans off over 30 years (not really likely to happen). For those who want to do the same calculations, a loan calculator can be found at www.smartloan.com. For those whose Federal Perkins are just a drop in the bucket of their total loans, the savings here are likely to be negligible.

 

[argh]

I think the value of the re-amortization will come from how you decide to use the money. If you decide to blow it on just regular stuff, then yeah, you might be better off just paying off the loan with higher monthly principal payments. However, if you take the extra 100 bucks a month or so and invest it in something that appreciates in value beginning in year 4 (say something simple like an s&p 500 index mutual fund that has a historical return of like 6-7% a year on average) versus investing the extra 750 or so dollars a month beginning year 25 or 26, then I think re-amortization makes a big difference at the end of 30 years.

 

[scootad.]

OK now I'm really confused. This is a direct quote from a yellow booklet given out to me at my schools financial aid exit interview (the booklet is titled "Repaying your Student Loans" published by US Dept of Education). On page 19 it defines deferment and says "for Federal Perkins Loans, subsidized FFEL Stafford Loans, and subsidized Direct Stafford Loans, you dont have to pay principal or interest during deferment"

So, the GL people told you that you do have to pay interest on Perkins if its consolidated?? I spoke to the lender of my Perkins loan (ACS) and the woman on the phone told me that the govt will pay the interest on the Perkins loan during my period of deferment regardless of whether its consolidated or not.

Who to believe???

 

[prominence]

For those of you who have received the Graduate Leverage Recommendation, which repayment plan are you planning to choose? Here are the options:

1. Equal Payment Plan

2. Graduated Repayment
a. Select 2/Alternative
b. Select 5/Alternative

3. Income Sensitive Repayment Plan

4. Extended Repayment

anyone?