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Mar 12, 2007

New Laws Reconsolidating Student Loans 2007

I made notice of following:

Q: Can married couples consolidate their loans together?

A: No. A recent change in federal law eliminates the ability of married couples to consolidate their loans together. The new law is effective for consolidation applications received on or after July 1, 2006.

Q: If home mortgages can be refinanced repeatedly, why can’t
federal educational loans be reconsolidated to take
advantage of the current low interest rates?

A: Home mortgages are quite different from federal educational loans in
a number of ways. First, mortgages are secured by the value of the
borrower’s property whereas educational loans are ultimately
guaranteed by the federal government. Second, there are usually
significant costs associated with refinancing a home, such as points,
appraisal costs, application fees, etc. No fees can be passed on to a
borrower on a Federal Consolidation Loan. Third, the interest rates on
mortgages are market-based and lenders recognize that many
borrowers will sell their homes before the end of the loan term. The
interest rates on educational loans have been written into law. Finally,
permitting borrowers to reconsolidate repeatedly would destabilize
the student loan market, which could make it difficult for current
students to obtain the loans they need.

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