How To Choose a Federal Student Loan Consolidation Lender

In the past few years, many students and graduates took advantage of record-low interest rates and consolidated their federal student loans to lock in the historic low rates. If you missed out — don’t fret, here is a simple guide on how better narrow down your decision for a future consolidation.

Besides locking in lower rates, there are some other reasons why you may want to consolidate your loans. Check out FinAid’s list of pros & cons to consolidating student loans.

So when rate changes comes around and locking in lower interest rate becomes a no-brainer, who should you choose to consolidate your loans?

The easy answer: your current lender. You’ve chosen your current lender for a reason, there’s no reason to complicate things further by going with a different lender. However, the problem with the easy answer is, you may have chosen the wrong lender in the first place, or, get this—there may be better lenders out there.

FACT: The only differences between federal student loan consolidation lenders are: Lender Repayment Incentives and Lender Service. Don’t underestimate their importance!

If you currently have a federal student loan for yourself or your child, you’ve no doubt received many solicitation from different lenders to get you to consolidate your loans to them. Many of these will tout some type incentive programs. Common repayment incentives are along the lines of reduction off in interest rate, after a certain amount of timely repayment.

Example: After 36 months of consecutive [timely] payment on your 10 year loan, you receive a 1% discount from your loan.

This typical type of lender incentive sounds great enough, but the problem is, many borrowers fail to qualify for the incentive program. Many of these incentive offers require timely monthly payment, so if you miss a payment deadline before reaching the required payment term, you won’t receive the rate deduction bonus. The same applies if you miss a payment deadline after earning your bonus.

In comes a different type of incentive program: immediate interest rate deduction if you sign up for auto debit, with additional deduction after consecutive payment.

Example: You receive a 0.5% interest rate deduction if you sign up to have your monthly loan payments automatically withdrawn from your checking account. Plus, after 24 months of consecutive on-time payment, you receive an additional 1.25% deduction in your interest rate.

A much nicer incentive, right? The above example is from ELC, which unfortunately has a minimum of $20,000 for their 1.25% deduction. If you only have a $10,000 loan, you’re out of luck on the additional interest deduction. Thus, it’s important to compare the offers and figure out which programs you can actually qualify.

As mentioned above, the second difference amidst the sea of lenders are lender services. Even if the incentive program is the best in the world, if the lender has a spotty track record for customer service, you may be doing yourself a disservice by signing up. What happens if you wish to defer your payment? If you call to ask about that, or a general inquiry on your loan, will they respond in a timely matter? For those of us with a low loan amount, lender service may not be a big deal—but for those of us that are in it for the long haul, you’ll want approachable service.

Remember, you can only consolidate once. So if you choose the wrong lender to go with, you’ll be stuck with them until you pay off your student loan for that expensive private university.

Important questions to ask when you’re choosing your lender:

• What is the repayment incentive?
• Is there a waiting period for the incentive? Do I have to earn it?
• What happens if I miss a payment?
• What happens if I request a deferment?
• How many of the borrowers actually receive the incentive?
• Is the lender knowledgeable and experienced?
• What is the credibility? Does your school support or recommend the lender?
• How is the accessibility?
Are there online account access? A 24/7 customer service number? If you call them, will they give you information tailor to you, or will they give you some generic scripted response?
• How is their long-term commitment? Does the lender have a history of selling consolidated loan?
The worse part in owing money, is when your lender disappears and some other company buys out your loan; suddenly you owe money to someone else.

If you can’t figure out some of these answers with the information provided to you, ask the lenders. This is a great way to gauge their service. If a customer service rep is having a hard time, or trying very little to help you understand their program, it may be a good cue to stay away. If they’re being such a hassle when you’re trying to give them money, imagine when you already owe them the money!

More Resources to Check Out:

• Bank Sweeten Student-Loan Terms from the WSJ
• Student Loan Consolidation Info from FinAid.org
• Best Student Loan Consolidation Deals from Fatwallet Finance Forum. Great thread with a list of various different lenders, their incentive programs and some first-hand customer service experiences.

More re selling loans - losing borrower benefits inevitable?

If you consider student loan consolidation, you better be aware of these tricks.

I bet you've been getting tons of email junk about student loan consolidation.
Tell me, did they promise "reduced interest rates"? Yes? OK, but look for the fine print - I guess you’ll find terms that allow the lenders to change - or even take away! - these benefits.

I compiled a list of common tricks loan lenders use to make sure you don’t earn their benefits.

1) “On-time payments” - Many lenders offer discounts for making on-time payments. What they don’t tell you is that to keep the discount you have to continue making on-time payments until the loan is paid off – which could equal up to 30 years of on-time payments!

Most lenders give borrowers a “grace period” before they will consider a payment late (typically around 14 days). However, some lenders require payments to be made “by the due date as initially scheduled” in order to qualify for their benefits. This means if your payment is not received by them on your payment due date, you lose your benefits.

2) Managing Your Loans Online - Some lenders may require you to apply online in order to even be eligible to receive their benefits.

Some lenders also require you to receive all correspondence from them electronically to be eligible for their benefits. If they send you an application confirmation via email, and your email address is deemed undeliverable twice in 48 hours, then you may not get the loan benefits. Also, if you ever change you email address without notifying them and their correspondence bounces back to them you could lose your benefits.


3) Automatic Debit - Most lenders offer borrowers an additional interest rate reduction (typically 0.25%) for using auto-debit (ACH) to make their monthly payments. However, some lenders tie the ACH benefits and the other benefits together. You have to use ACH to get the benefits. If you lose ACH then you lose the benefits too.

Sometimes the opportunity to sign up for ACH is limited to 30 days from the signing of the application. If the borrower does not follow up with the lender to get ACH WHILE the application is processing, then they can be outside of the sign up window. ALL benefits lost before they get their first bill!

They are required to sign up to receive their bill via email. In addition every month they must reply to the email acknowledging receipt. If they don’t they lose ACH which causes them to lose their benefits.

Returned emails, NSF in their checking account and failure to notify of a change of address are additional ways to lose ACH, which causes loss of other benefits.

4) Repayment Plans - There are four “repayment plans” that lenders can offer: Standard, Graduated, Extended and Income-sensitive. With a Standard repayment plan borrowers will pay a fixed monthly amount (principal + interest) for the life of the loan. With the other three options, borrowers can start with lower monthly payments by paying interest only for the first two years (Graduated), three years (Extended) etc.

Some lenders require borrowers to be on a Standard repayment plan to qualify for their benefits.

5) Minimum Balances - Some lenders require minimum balances to qualify for benefits (usually $20,000 or more is required).

6) Forbearance/Deferment – These are ways for borrowers to stop making payments for periods of time, such as times of unemployment or if they go back to school.

With some lenders, borrowers can lose their benefits if the apply for deferment or forbearance.

7) Proof of Graduation - Some lenders require borrowers to provide proof of graduation in order to keep benefits.

8) Early Pay Off - Borrowers can sometimes lose their benefits if they pay their loans off early.

Selling loans = loosing borrower benefits?

Do you wonder if selling loans will lead to losing borrower benefits?
Choosing a lender can be one of the most important decisions you’ll make when borrowing money to pay for school. Be sure to take into account the savings offered by each lender such as origination fee discounts, interest rate reductions, or rebates. To help you make the best possible choice, consider the following information.

Under federal guidelines, lenders are allowed by law to charge an origination fee of up to 3% of your gross loan amount. Some lenders offer you discounts on this fee, while others may offer special discounts or rebates for making a number of consecutive on-time payments. For more information, see the Loan Cost Comparisons of KHEAA’s Major Lenders. Loan costs change periodically, so you should contact the lender for the most current information.

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Loan Cost Comparisons of KHEAA’s Major Kentucky Lenders
o Federal Stafford Loans
o Parent PLUS Loans
o Graduate/Professional PLUS Loans

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Loan Cost Comparisons of KHEAA’s Major Alabama Lenders
o Federal Stafford Loans
o Parent PLUS Loans
o Graduate/Professional PLUS Loans

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Loan Cost Comparison for Alternative Loans

The Kentucky loan cost comparison chart is provided in the popular Adobe Acrobat™ format. If you need the free Adobe Acrobat Reader™ software, you can download it by clicking on the Get Acrobat Reader™ button below.


Following are important questions to ask about lenders you are considering for your student loan.

Does the lender provide origination fee discounts, interest rate reductions, forgiveness of principal, or other incentives?

The bottom line is that discounts and other incentives can save you money! Lenders are not allowed to provide an origination fee discount prior to disbursement for PLUS loans.

Does the lender sell its student loans?

Many lenders sell their loans to other holders or secondary markets after the loans have been disbursed. When your loan changes ownership, the servicer may also change multiple times during the life of your loan. It is important that you stay in touch with your loan holder and/or servicer to ensure you fulfill your repayment obligations.

Does the lender use a servicer?

Many lenders use loan servicing agencies, or servicers, to handle the day-to-day work on their student loans. Servicers handle not only borrowers’ questions about their loans, but also repayment and deferment issues. Since the borrower/servicer relationship is often long-term, it is important for you, the borrower, to know who you are dealing with. Some lenders service their loans locally and some use out-of-state or national servicers.

Does the lender require a credit check?

Federal regulations require that credit checks be performed for all Federal PLUS Loan borrowers. However, some lenders may require credit checks for Stafford Loan borrowers as well.

Does the lender require a "customer relationship"?

Some lending institutions, such as credit unions, require that you are a member of their institution before they will accept your application.

Does the lender offer Federal Consolidation Loans?

You are required to make payments to each lender that makes a student loan for you. If, throughout the course of your education, you borrow from more than one lender, you may be eligible to consolidate those various loans into one loan. By doing so, you will only have one payment to make to one lender each month. You may also reduce the amount of your monthly payments once your Consolidation Loan is approved. However, you may lose certain other benefits, such as deferment options, so consider these carefully before consolidating your loans.

As an alternative to a Consolidation Loan, some lenders are willing to buy or sell your loans from/to other lenders. This allows you to retain the same benefits on your loans and make one monthly payment. You should contact your lenders to determine if this is an option for you.

What is a preferred lender list?

Many colleges provide student borrowers a list of lenders to consider. These lists are developed by the colleges under a wide variety of objectives which may include some of the following: (1) prior service provided to borrowers at that school, (2) discounts or other borrower savings provided at loan origination time, (3) savings provided to borrowers during repayment of the loan, (4) proximity of banks/lenders in the area where the college is located, (5) electronic processes offered to student borrowers and the college financial aid office necessary for efficient and timely delivery of funds, and (6) cancellation provisions for borrowers who enter certain professions after graduation. These lists are suggestions and are provided as a convenience to the borrower for consideration. As a borrower, the ultimate decision on which lender to use rests with you--compare the origination fees, discounts, and other savings each lender offers and choose the one that is best for you.

Once I’ve compared lenders and the benefits they offer, how can I make sure I get the benefits I’m looking for?

Different lenders may have several different Lender ID Codes, and each code may have different benefits associated with it. Be sure to use the correct Lender ID Code when you fill out your loan application.

Life After College

How many times have you said to your friends, “I can’t wait to be able to afford all those things we can’t afford now”? The prospect of earning a “real” salary, buying a new car, and getting a new wardrobe is really exciting, but don’t forget that this new lifestyle is also going to include having to pay bills at the end of each month.

Once again, having a plan in place will help you deal with the new financial challenges you’re about to face. This time the plan is called a budget. It’s not easy to anticipate all the expenses your salary will have to cover, so putting the data on paper will help you see where your money goes. Here are some things to consider.

Credit Card Debt
Banks make getting credit cards easy. Credit cards make spending easy. But sometimes easy is not so good. Credit card companies market extensively to recent graduates because there is a great deal of money to be made in that market: Interest rates vary from card to card and may range anywhere from 10 to 20 percent yearly. It’s very easy for a new graduate to get caught in the credit card trap.

Before you accept or use your new credit card, make sure you carefully read and understand the fine print and can pay at least the monthly minimum balance. If at all possible, pay off your credit card debt as soon as possible. If you have a savings account or have received money as a graduation gift, you should consider paying off your credit card bills before you take that expensive trip you’ve been dreaming about. “Pay now, buy later” is a good rule of thumb at a time when your income is limited.

Repaying Student Loans
Most students are troubled by the prospect of repaying their student loans. They’re not sure of the who, what, when, and where of the system. Here are a few things to remember:

* All students who took out loans and signed promissory notes during their undergraduate study now have a legal obligation to repay that amount and any interest associated with that loan.
* Know the addresses and phone numbers of all your lending agencies.
* Know all of the loan repayment options that are available to you, such as loan consolidation, standard repayment, and graduated repayment. Choose the option that will best fall within the limits of your budget.
* A deferment is postponing the repayment of a student loan. As a borrower, you have a legal right to exercise this option if circumstances merit.
* Forbearance options are also available, where the lender agrees to extend your payment schedule to avoid a default situation. Contact your lender immediately if you are having problems with your repayment schedule. On certain occasions, lenders may be willing to temporarily change your repayment schedule.

A word of caution is needed here about credit ratings. Anytime you are late with a payment, whether it be a credit card payment, car loan payment, telephone bill, or rent, it most likely will be reported to a credit bureau. This bureau will be contacted when you try to get a mortgage or want to borrow money to make any kind of sizeable purchase. It’s very important to remember that your buying and spending habits now may have major repercussions in the future.

Buying a Car
Making any major purchase requires lots of research before the transaction is completed. The process of buying a car is time consuming and takes lots of patience.

The first step is to decide whether you want a new or used car. More and more people are buying used cars, since the initial cost of buying a used car is usually a good deal lower than the purchase of a new car.

Then, you should spend time prioritizing the extras you want. Can you really afford a sunroof or that stereo system that has spectacular sound? It’s true that such items will increase the resale value of your car, but they will also increase the purchase price.

Know the cost of insurance for the car before you buy a new car. Investigate several insurance companies and learn what services they provide, how much deductible you will have to pay, etcetera.

When it’s time to pick up your car, you will have to sign all loan agreements, have a certified check for your down payment, and have a check to cover the costs for the registration of your car. You will need some sort of verification from your insurance company to indicate that the car is insured.

Ultimately, you should consider all options before committing to costly payments each month, and remember, if you’ve made the wrong choice, you can always go to Plan B or even Plan C if necessary.

Building a Professional Wardrobe
Now that you’ve got that job, what kind of clothes will you need and, just as important, what impact will buying these clothes have on your budget?

Dress codes vary greatly, depending on the industry and management team at the helm of a business. If you’re not sure you’re dressing right on the job, look around you and notice the attire of the managers and others who are the decision makers. Meanwhile, wear your more conservative clothes until you get a sense of what’s appropriate.

But how do you manage to buy a wardrobe for your new work situation, while you’re living on a very tight budget? Once again, you’ll need to devise a plan.

You really don’t need to buy a great many clothes. Start with the basics and add new components and accessories from there. The mix and match rule will help you recycle the same outfits until you can afford to augment your wardrobe.

Also, check out discount stores and resale shops for apparel, at a fraction of the retail price. Think of buying clothes that are “classic” and not in a style that will be out of fashion next year. An expensive suit that you can wear for five or six years is a better investment than a poorly made bargain that looks shabby after you’ve worn it for a year or two.

If you put some time and effort into planning your wardrobe, you can look like a successful, big-time career person, by only using a small-time budget.

From: Reality 101: The Ultimate Guide to Life After College, by Fran Katzanek

i really enjoyed this book. this is an excerpt from this great novel. i recommend anyone reading this who is stepping out of college and fresh into the working world. considering i am one of those people, i had to pick this up at Barnes & Noble. Glad I did! This book is great. Besides, its nice to have a "smart read" once and awhile.

Reconsolidation Loans

John Carlton writes today in his blog:

...Here’s what I’m talking about: The Web has “officially” become the Number One source for advertising for many of the culture’s biggest advertisers — a year earlier than predicted. Gazillions of bucks that used to be channeled through “traditional” media (newspapers, magazines, direct mail, television, radio, etc) have now been measurably diverted online.

For the people who keep track of this sort of info, this news is astonishing and troubling (if not unexpected).

The entire foundation of our capitalistic economy is shifting, and most of the former movers and shakers simply are not prepared for the change.

The obvious signs of upheaval are the disappearance of entire market segments. Like most of the music-selling stores (Tower, Wherehouse, your favorite former local hipster CD haunt)...

Read more at his blog.

Comprehensive Overview of Student Loan issues

These days, getting angry seems to be part and parcel of earning a degree. And I'm not talking about student protests. I'm talking about student loans.

Higher education has always been expensive and applying for financial aid was never easy. The difference now is that student loan debtors, like other consumers, are more vocal when they think they're being treated unfairly. And student loan companies don't like what they're hearing.

The latest controversy revolves around Loan to Learn, whose parent company EduCap Inc., based in Herndon, pioneered the private student loan business.

A quick and dirty primer: Students have several pools of money to tap into to pay for school: their family, grants and scholarships, federal loans and private loans.

Student borrowers are limited as to the amount of federal loans they can take out. And family and grant money are, for most people, a finite resource. That's where private loans come in.

Reconsolidation loan gimmicks you shall be aware of

If you are thinking about reconsolidating your loan, getting a student loan consolidation or whatver else kind of loan (like, wedding etc.) there are things to watch out for, and often you have to read the fine print to find them. Here are some marketing gimmicks some consolidators will use to get you to do a consolidation loan:

• "Apply by this deadline!"
Well, the fact is THERE AREN’T APPLICATION DEADLINES in student loan consolidation. Just keep in mind that interest rates may change every July 1st, so it’s a good idea to check if rates are going to change that year and determine if you should apply before the loan interest rates change.

• "Apply online and get great interest rate benefits!"
Some loan consolidators may require you to apply for a loan online in order to receive interest rate discounts. Plus, if they send you an application confirmation via email, and if your email address is deemed undeliverable twice in 48 hours, then you may not get the discounts!

• "Get an 0.25% interest rate reduction by doing business electronically."
That’s great but you might LOSE that 0.25% reduction if you simply change your email address and they get a bounce back when they try to send your notice or statement. Be sure you understand your obligation to the consolidator in order to keep your reduction.

• "Avoid late fees...pay with auto-debit."
With auto-debit, watch your bank account balance! When the lender tries to auto debit your bank account and there are insufficient funds you may get a late fee from both the consolidator and your bank. Be sure to read the fine print to get specific details on their auto-debit program.

• "No fees to apply for our consolidation loan!"
Not charging fees is a requirement with federal loans. No one charges a fee for a federal consolidation loan.

• "Important information about YOUR student loan interest rates!"
Some loan consolidators attempt to mislead you into thinking that you’re being contacted by the lender of your education loans and that there are changes to your loans. Their hope is that you will contact them so that they can offer you their loan instead. Check out these lenders carefully before applying for a loan.

• Mailings that use seals or logos to imitate the government, a college or university.
Some loan consolidators do this to entice you to open their mailings. Be sure to really check out their logo and fine print to ensure you know who you are dealing with before applying for a loan.

• "Get Deferment or Forbearance Insurance."
Be on the lookout when some loan consolidators may play-up their services. If a loan consolidator offers you Deferment or Forbearance Insurance, they are basically "offering" you deferment or forbearance, which is a standard feature of consolidation loans and is offered by all lenders. Be sure to compare apples-to-apples and understand the actual benefits that your may receive with a loan product.

Remember: If it sounds too good to be true it probably is… read the fine print, ask questions and get it in writing!