What to Look for in a Student Loan Consolidation

The key lies in finding the best borrower benefit package (Typically rate reductions offered for on-time payments or auto-debit payments) with the least amount of small print and misinformation. There are so many marketing gimmicks out there; "no fees," "grace-period rate reductions," "principal reductions,"etc. Thankfully there are comparison sites, such as "Simple Tuition" that are helping make the search somewhat easier, while companies such as "theLoanster.com" are offering best-in-group benefit packages.

Thursday, January 18, 2007

H.R.5; unintended consequences

As Senior Vice President of a FFELP Consolidation Lender and someone who has worked in Medical education in the past, I looked forward to this legislation. Unfortunately, the bill passed by the House yesterday leaves, as you are well aware, much to be desired.

Not only does the bill simply address the smallest loan group (Subsidized Stafford) it purports to assist paying for this by increasing fees/decreasing stipends to lenders, (and more specifically consolidation companies).

I am sure you are well aware that members of your association have been at the forefront of using consolidation as a means to temper the high costs of a medical education. Unfortunately, this bill will provide a direct hit to some of the incentives that smaller consolidation lenders are able to offer (See H.R.5; Items #7, #8). It is no wonder the larger lenders were lobbying for this portion of the legislation.

As of now, theLoanster.com is able offer a total of 2.25% in Rate Reductions for Auto-debit and on-time incentives. We are also able to make the 2% (On-Time) portion of the reduction permanent once it is earned (sans default). Throw in the ability to go into a residency deferment without losing borrower benefits and you can understand why larger lenders were interested in these details. After July 1st, all these benefits will need to be reassessed.

A medical student with $100,000 in Federal debt looking to consolidate stands to take a hit of approximately $25000 dollars over a 30 year consolidation.

This is a small first step indeed.

Regards,
Thomas

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