student loan consolidation while still in school?

Look at me... I am SIS:

Student Loan Consolidation Deals and Info

Wheeeeeeeeeeee!!!!!!!!

jcohen73 said: GBWisc

I am familiar with that thread and have read over the postings. My question was a bit different and not usual, that is why i started a different thread. The thread was regarding deals in regards to consolidation.

My thread is figuring out how to consolidate if you are not technically eligible due to "in-school" status.
....
Speaking in the incarnate spirit of SIS:
The first question in the FAQ most likely answers your question. Why not call the lender and specifically find out if you can do it?

You can consolidate Federal Direct Loans with Direct Loan Consolidation. It is separate, and yet together with Direct Loans, kinda weird. Got 2.7% locked in on like 55k. I'm just hoping I graduate while UHEA is still running there awesome deal (and interest rates are still low). I think anything below 2% is like making money cuz of inflation.

supertle said: my understanding is that when you consolidate a loan, you give up all the ability to defer the loan and interest on it even if you go back to school? it might make sense i supposed on private school loans that have accruing interest while in school

This is not true on the loans I have seen. That is probably why they don't want you to consolidate while you are still in school!

It's a gamble, and unless you're paying off those interest that starts accruing, it just doesn't seem that you would save much to make it worth the trouble, rates change each year in May, so unless it skyrockets, you're going to have 15 months of interest on the loan, which can be huge if the loan is big, you could've just start paying the loans off now in small amounts while in grace to reduce the principle b4 the interest starts accruing

i hope you calculated the interest you 'll be accruing now vs. some scenarios of what the interest will be later on and see how much you saved. Typically education loans are generous and they're designed to help you pay for school w/out worries, hence the interest free while in school for subsidized loans,grace period, defferment, different payment plans etc, all these things were for you, i dont think you'll come out much ahead

I've actually been wondering the same thing that jcohen brought up...I currently am a graduate student in a 2 year program (I graduate May of 2006)-- I took out 15,000 dollars worth of loans this year, and plan to take out 15 grand more for the next school year, too. I, too think that rates are going to be considerably higher in a year and a half. Since I currently have an unsubsidized loan, I'm not worried about the interest building up any earlier, since its started already anyhow. But I just wanted to clairfy, jcohen- I should call my lender in May of this school year, and say I withdrew from my school. But what about once I go back in September for my final year? That's the part I'm confused about...any and all advice is greatly appreciate. Thanks in advance,
Jason

My first suggestion would be to ignore billkong since he apparently didn't read this thread, because it is possible! My second piece of advise is this.. You can withdraw from a semester and go back the following semester and be eligible for student loans. It might be wise to use another lender just to have various lenders to give yourself options as to who to consolidate the future loans with. You do not need to tell the lender your back in school, the school automatically sends information to the lenders saying you are eligible

jcohen73, I understand what you are saying. I am a student and borrowing money, too.
From what I understand:
if you got sub. loan, you don't have to worry about interest while you are in the school.
But you are giving up the interest free loan if you try to consolidate. <- it is worthful since you could lock the LOW rate

I think if you have a huge loan or a unsub. loan, it should be "doable"

sorry about the english

pls report back if you succee
i will follow

Good work, jcohen, very creative.

Here's a possible idea for anyone who, like me, is a student not graduating this year and has not taken out the full $18,500 in Stafford loans for the 2004-2005 school year. Get in touch with your financial aid office ASAP to request a loan for the difference between $18,500 and the amount you have borrowed in the 2004-2005 school year. (or *possibly* less if you will need less, in total, over the coming years.) This way you can lock in you rate via consolidation at 2.875% before it goes up. If you have an Ing or other savings account/investment source that earns more that 2.875% you will be earning money on that anticipatory loan amount while avoiding that higher future interest rate on later student loans. I am assuming that the tax loss on your investment gains will be offset by your having locked in the lower rate on your loan. Any thoughts on this idea?

Bump:

Now you can consolidate in school!

Students in Guaranteed-Loan Program Can Lock In Low Consolidation Rates While Still in College, Department Says
By STEPHEN BURD


Washington

The U.S. Education Department announced on Monday that it will, for the first time, allow hundreds of thousands of students to consolidate their federal guaranteed loans while they are still in college.

The department's decision is big news for these students, as it will enable them to lock in historically low interest rates over the lives of their loans, and save thousands of dollars, before the rates are reset in July. Federal budget analysts project that the rates -- which are now as low as 2.8 percent -- will jump by as much as two percentage points on July 1, and will continue to grow over the next several years.

"The Department of Education should be applauded," said Kate L. Rube, higher-education adviser to the State Public Interest Research Groups, which advocates on behalf of students. "Anything that would help more borrowers consolidate at the low rates available right now is something we support and encourage."

Borrowers in the federal direct-loan program, in which the government provides loans directly to students through their colleges, are already allowed to refinance their debt while they are in college (The Chronicle, July 9, 1999). But under federal student-aid law, borrowers in the competing guaranteed-loan program, in which banks and other lenders provide government-backed loans to students, are not allowed to do so until they begin paying off their loans.

With the interest-rate increase looming, some financial-aid administrators and lenders found a loophole in the law that they said would allow guaranteed-loan borrowers to lock in the low rate. Under the Higher Education Act, borrowers can choose to repay their loans while in college. Those students could then consolidate their loans, and defer their payments on the consolidated loans until they graduate.

In a letter issued to aid administrators and loan-industry officials on Monday, Sally L. Stroup, the Education Department's assistant secretary for postsecondary education, endorsed that approach. "This guidance is consistent with the department's treatment of consolidation-loan interest rates for direct consolidation loans," she wrote.

Nancy C. Coolidge, who handles government relations on student aid for the University of California system, has championed the loophole approach and was delighted with Monday's ruling. "We're happy that the department agrees," she said.

Ms. Coolidge has spent the past several months pleading with her colleagues across the country to make their students aware of "this unique opportunity." In an e-mail message to an Internet discussion group for financial-aid administrators last month, she noted that without the change, a guaranteed-student-loan borrower who was in the third year of a four-year professional-school program and had taken out $18,500 in loans per year would have to pay as much as $20,000 more than an identical student with direct loans.

"I could find no public-policy basis for such inequitable treatment," Ms. Coolidge said on Monday, explaining why she has devoted so much time to this effort.

While many lenders have rushed to help students in the guaranteed-loan program refinance their debt, some loan-industry officials have argued against the approach advocated by Ms. Coolidge.

In fact, officials with the National Council of Higher Education Loan Programs, which lobbies on behalf of loan-guarantee agencies, wrote a legal opinion for the Education Department questioning the legality of providing consolidation loans to students at colleges in the guaranteed-loan program. Brett E. Lief, the group's president, said that his organization had drafted the opinion at the request of department officials who were reviewing their options.

Mr. Lief said that he was particularly concerned that the huge surge in demand for consolidation loans would be extremely costly for the government and could imperil future increases in spending on federal student-aid programs. The government makes up the difference to lenders when the interest rate that is set on student loans in a given year exceeds that which borrowers in previous years have "locked in." With hundreds of thousands of college students consolidating their loans this year, the government will be required to make payments to lenders for up to the next 30 years for every year that the interest rate on student loans rises above 2.8 percent.

"We want to make sure that people would look at the broader public-policy question, which is ensuring that future students would not be deprived of aid because of the money we're spending to help current students," he said.

In the rush to consolidate, Mr. Lief also worries that borrowers will not have the time to determine whether refinancing is in their best interest. Borrowers who consolidate their debt, for example, lose the six-month grace period they would normally have after graduating.

"This is going to be like the charge of the Light Brigade," he said. "And that's going to make it difficult for borrowers to practice the due diligence they need to determine that this in their best interest."

Mr. Lief is among the loan-industry officials who have been calling on Congress to change how the interest rate is calculated for borrowers who refinance their debt. Under the lenders' proposal, which has received the backing of the Bush administration and Republican leaders in the U.S. House of Representatives, borrowers would no longer be able to lock in low, fixed interest rates. Instead, the interest rate on consolidation loans would vary from year to year, based on market conditions.

Student advocates, who are fighting to preserve a fixed-rate option, say that the department's decision in this case shows how beneficial the consolidation program is to borrowers.

"We're glad to see the Department of Education acknowledge the benefits of fixed-rate consolidation loans for borrowers," said Ms. Rube, of the State Public Interest Research Groups. "We just hope that this option continues to be available."

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Copyright © 2005 by The Chronicle of Higher Education

Direct Loans will do in-school consolidations, you can then re-consolidate with UHEAA after your final loans.

I have financial aid being disbusrsed in late june, and then again in january anyone know if there is a way to include it in the consolidated loan at the low rate???

thats good thinking, I will try conatcting my financial aid office and find out... Do you know anything about the 180 day rule for bundling loans into a consolidation. My loan company said that would dollar average the interest rate with the new rate, but then someone else told me the consolidation remains at the same rate...

Malloryweiss,

with the Add-On Form, do we still need to cancel the Jan loan to make the June loan a "fully disbersed stand-alone loan" like what you suggested a couple posts up? Thanks so much for your help.

malloryweiss said: Talked to a CSR at Direct Loans right after my last post, and told him that I wouldn't have a lot of time between my June loan and July 1st. He suggested using the 180 day rule. It just lets you add a new loan into an existing consolidation within 180 days of completing the consolidation (or if it hasn't yet been completed).

Basically, you'd go ahead and apply to consolidate your current loans now, before the June loan is made. That way, it'll definitely go through and you won't be stuck with a higher interest rate. Then, after doing what was in my last post, you turn in the "Add-On Form" to get the June disbursement into the consolidation. As long as the form is turned in before July 1st, you get the lower interest rate.

I'll post a link to the Add-On Form when the Direct Loans site comes back up, but here is what is says in the directions:

Use this form if you would like to add an eligible federal education loan(s) to your Federal Direct Consolidation Loan (or the application you have submitted).

Note: If your Federal Direct Consolidation Loan has been made already, you must return the completed form to us within 180 days after the date your Federal Direct Consolidation Loan was made. If you want to consolidate an additional education loan(s) after this period of time, you will need to apply for a new Federal Direct Consolidation Loan.

Here is the response from my financial aid office, per the idea suggested here....

Federal law requires that the Stafford loans be disbursed in 2 or more installments. If you reject half of your loan now, we cannot get you funds for just the fall semester. The new amount will still be divided by your lender into 2 disbursements. If we tell the bank to only send funds for the fall term, then the loan still must be divided into 2 disbursements, one which is issued at the beginning of the term (10 days prior to the first day of classes), and one issued at the mid point of the term, in September.

If you wait until the funds arrive, then request cancellation of the spring portion of your loans, we will not have sufficient time to notify your lender. The beginning of the term is busy, and there are a lot of functions that we are required to perform by the University, the State of New York, and the US Department of Education.

If you contact your lender directly, after your refund is processed by the Bursar's Office, they may be able to do what you are requesting. However, you will receive only one half of your subsidized Stafford Loan. This could create problems later if the lender has to adjust your fall loans to insure that you receive your maximum eligibilty as required by law.

The Financial Aid Office will reprocess a loan application for you if you send funds back, then change your mind. Please be aware that there may be problems in certifying eligibility if you have consolidated. Data about loan disbursements is reported at different times to the National Student Loan Data System by lenders. When the reporting of the repayment of consolidated loans is delayed, it appears that the student has borrowed significantly more money, and has limited eligibility remaining for federal loans. The US Department of Education sends us a revised FAFSA. The ISIS computer system uses the data from the FAFSA to determine if a student is eligible for additional loans. If the FAFSA shows limited eligibility, we are blocked from processing a loan until the corrected data is finally received. In some cases, that has taken 2 or 3 months. If this should delay receipt of your loans for the spring term, the Bursar's Office will not waive a late payment fee.

As you can see, the process of disbursing a student loan, cancelling it, then reprocessing it again is not simple. I appreciate your desire to maximize the amount of loan you can consolidate at the lower interest rate, but our resources are limited. At this time of year the priority of the Financial Aid and Bursar's Offices is the delivery of funds to students and crediting the proper funds to accounts.

I have found a deal through this site that offers 1.57% loan consolidation. How about that?
It's through MyRichUncle.com, a company that seems to offer private loans at better terms than other private companies. They only do private loans to 4yr college, I have no idea what their consolidation terms are.

DaveHanson said: If I understand correctly, any loans that are to be consolidated under the low June 30 rates must be fully disbursed by June 30. Is this correct?

Yes. From Direct Loans FAQ: (Consolidation -> Who is eligible)

"Borrowers who apply for an in-school consolidation should apply after their last loan is fully disbursed AND allow enough time for the Loan Consolidation Center (LCC) to receive the application BEFORE their last day of attendance in order to take advantage of the in-school consolidation benefits."


I ask because I have a $10K in loans coming for the summer, half of which will be disbursed June 13, the other half on July 12. My wife has $1,820 left in perkins loans. What I'd like to do, if possible, is consolidate the whole shebang--but it's looking like I can't do that.

Talk to the financial aid office for your loan coming in. It might be possible to consolidate half of the loan...see my first post on this page. I still haven't done this yet though...waiting for my disbursement.