imagination said:Rathipon said:

Current students can definately benefit from a direct loan consolidation right now. If they can get it done before July 1, they will lock in the nice rates.

Rath

Rath, is this true? I have a friend who is a current undergrad with lots of loans and she believes she can't consolidate because she's still in school. Is there any reason she shouldn't be able to consolidate her student loans (like a specific situation)? This could be good news for her.

Just to share my experience, I was stuck with the single-lender devil (sallie mae) problem. After reading Rath's post on the other thread, I consolidated my loans with Direct Loans on their income contingent plan. I wasn't sure if it would go through, but it did! I had to send supporting documents (paystubs) because I hadn't been repaying for 2 years.

I think I may have gotten lucky because after I applied, I got a call from Sallie Mae trying to match Direct Loans and keep my business. I wasn't prepared to talk to them and played dumb.... "Do you have more than one lender?" "I'm not sure..." "Our computer shows you do." "Yes, I think that's correct." The only open loans I had were with Sallie Mae, but why bother correcting them.

I'm going to reconsolidate with UHEAA now. I'll let you know how it goes. Good luck!
I believe the WSJ article that was mentioned above covered consolidating loans while in school to lock in rates. There was an article in the LA Times last Sunday saying the same. Here's a link:
Time To Lock In Student Rates, May 15, LA Times by Kathy Kristof

You can consolidate your loans now to lock in the lowest rates in the 40 year history of the student loan program. I would advise your friend to read that article.

From the article:
Q: Can I consolidate my loans when I'm still in school?

A: Yes. If you are in the Education Department's Direct Loan program, you can convert your loan by contacting the department. The best place to start is the agency's website at http://www.ed.gov . There you'll find a questionnaire to determine whether you qualify and an application form.

*

Q: What if I have a student loan from a bank?

A: That makes the process for current students a bit more complicated. First you ask to begin "early repayment" of the loan. (A loan does not qualify for consolidation unless repayment has begun.) Next you apply for a consolidation loan from the bank or another lender. Finally, you apply for an in-school payment deferral — presuming that your aim is indeed to consolidate the loan and not actually to begin paying it off. That deferral lasts until you graduate or are in school less than half time.

late edit: I didn't see that Rathipon already replied. Oopsie

I am about to start my junior year of college in the fall.
I have the following loans:

Type of Loan Loan Amount Loan Date Disbursed Amount Canceled Amount Outstanding Principal Outstanding Interest

STAFFORD SUBSIDIZED $3,500 08/24/2004 $3,500 $0 $3,500 $0
STAFFORD SUBSIDIZED $2,625 08/18/2003 $2,625 $0 $2,625 $0

with a Scheduled Start of Repayment: 11/15/2008

Is there any point to consolidation?

Just fill me in , i am kind of new to this.

Thanks

JULY 1 IS APPROACHING EVERYONE!! It's put up or shut up time!

Great thread OP, learned quite a bit here. Thanks.
I found that if you are in-school or in your grace period (usually 3, 4 or 6 months after your last class end date) you can consolidate. Luckily, I went with a different lender on my last loan (forgot... that I will be able to consolidate. No legal threats needed, "it's all good" in the immortal words of some famous person I don't know. Thinking it's George Carlin, I like him.

Unless you are braindead, you realize a good deal when you see it. I suggest CFS or UHEAA for consolidation. The former might not be as backlogged as the latter, but UHEAA offers the best incentives. Good luck on getting your loans consolidated.

I had to rant and rave (lots of calls and letters on a law firm letter head) that it was my "right" to consolidate with the Federal Direct program when I consolidated from PHEAA in the mid 90s. Hopefully things have changed. Also, I don't know if some of the rules have changed so that there might be certain cases where you are stuck with PHEAA. I'd love to know if things have changed since I live in Harrisburg and have an opporutnity to influence PHEAA's procedures through an source of mine.

I used the same lender for all my loans, but the early loans were sold to different lender. I think that gets me around the single lender rule even though they share the same servicing agent. Am I right?

In the U.S. Dept. of Ed. Federal Direct Loan Consolidation Income Contigent plan, the most interest that can be capitalized to your loan is 10%. So if the principle is 50,000, then the highest it can go is $55,000. That $55,000 (or a lower amount if you were able to pay any principle) would be forgiven. yes, wiped out by the feds. You'll have to claim that $55,000 as taxable income (although everyone once in a while you hear rumblings of a bill that would change the tax code so it would not be taxable). But that would be 25 years later, so with inflation it wouldn't be like paying taxes on $55,000 this year, so don't break out into a cold sweat.

One caveat, if you "reconsolidate" then ALL of the interest is added onto your loan. For instance, if you consolidated $50,000, the most it can grow to is $55,000. But there will be a category called "interest due" Let's say that grows to 7,000. Well if you hear of a good interest rate and you take the bate, or you and your wife decide to consolidate jointly, then the new principle will be 62,000 (55,000 plus 7,000). Which means that the 25 year clock starts all over again, and your new maximam balance to be forgiven at the end of 25 years is 68,200 (62,000 plus 6,200 which is the 10 percent limit on capitalized interest).

Here's one more thing to consider. If you get married, EACH of your payments are based on your joint income. However, recently I've heard that perhaps the fact that you both have loans can lower your payment---I need to check into this. So you have to do the math to determine whether joint consolidation is for you. (Plus, if you get divorced, you're stuck with the shared liability of your ex's student loan).

So Income contingent plan participants who are low income should not worry about locking in a low rate since the most they can owe in interest is 10% of their original loan amount (which climbs when you reconsolidate). Also, DON"T ever get a deferrment if you are on the income contingent plan because when you are in deferrment you are not "technicallY' on the plan so all your interest during this time is capitalized and does not count against the 10% interest limit that can be added to your loan when you are on the income contingent plan.

Here's an email I received from my school's financial aide office:

Dear Student Loan Borrower:

GREAT SAVINGS FOR STAFFORD LOAN BORROWERS! Consolidate your Federal Direct
Stafford Loans NOW, while interest rates are at historic low rates (2.8% for
most borrowers). INTEREST RATES WILL GO UP ON JULY 1, 2005, so you MUST apply
before this date to lock in these low rates with a Direct Consolidation Loan.
It's quick and easy, and there is no down side, so don't delay!

FOR THE BEST RATE, APPLY NOW, BEFORE THE END OF SPRING TERM, JUNE 10, 2005, to
lock in the lowest "in-school" interest rates, EVEN IF YOU WILL BE BORROWING
AGAIN NEXT YEAR. There will never be a better time to lock in a low interest
rate. YOU MUST APPLY BEFORE JULY 1, 2005 in order to lock in this year's
historic low interest rates (between June 10, 2005 and July 1, 2005 the rate
goes up .6%). Waiting until next year to consolidate would cost a borrower with
$13,000 in Stafford Loans over $1,000 in increased interest, so DON'T LEAVE UCR
FOR SUMMER BREAK WITHOUT LOCKING IN YOUR STAFFORD LOAN INTEREST RATE!

To get started, you should first go to the National Student Loan Data System
(NSLDS) web site at http://www.nslds.ed.gov. NSLDS maintains records for the
Federal Stafford Loan program. Use this site to confirm your loan totals so that
you may ensure that all of your Stafford Loans are reported correctly for loan
consolidation. This site also helps you find the right person to contact if you
have questions about your loan history. In order to access the site, you need a
Personal Identification Number (PIN). If you already have a federal Electronic
Access Code (EAC) use that code as your PIN; you do not need to obtain a new
PIN.

You will not give up key loan benefits with a Federal Direct Consolidation
Loan:

1. You will still have your 6 month grace period once you leave school.
2. Interest will NOT accrue on your subsidized loans while you are enrolled
at least half-time, now or in the future.
3. You will not be expected to make payments until you leave school for MORE
THAN 6 MONTHS (your grace period.)
4. Most other deferments (unemployment, hardship, etc.) and cancellation
provisions remain the same. Forbearances are still available (interest
accrues, but installment payment amounts are less or none during periods
of forbearance.)
5. We advise you NOT to consolidate any fixed-rate loans, e.g., Perkins loans,
at this time.
6. Additional .25% interest rate discounts for electronic payment (ACH) are
available.

If you consolidate in the Direct Consolidation Loan program and make the first
12 payments on time, you keep the 1.5% rebate you got when your Direct Stafford
loans were disbursed. You will LOSE this benefit if you consolidate with a
private lender, so we strongly encourage you to contact the Direct Consolidation
Loan center first with all of your QUESTIONS ABOUT DIRECT STAFFORD LOAN
CONSOLIDATION: 1-800-557-7392.

What to do...
Check out the details and apply for a Direct Consolidation Loan online at:
www.loanconsolidation.ed.gov/borrower/bapply.shtml/

Sincerely,
Financial Aid OfficeHere's an email I received from my school's financial aide office:

GrouchUSC:

I may be wrong.. I never had any Perkins loans so I don't know too much about them.

My understanding is that a Perkins loan on its own cannot be used to establish diversity under the single lender rule with stafford loans held by a different lender, but consolidated Perkins loans can be used in that manner. It would seem to me that if you were to consolidate your two Perkins loans (which apparently are not subject to the single lender rule) with UHEAA, and the Stafford loans with Sallie Mae, then you would have diversity under the single lender rule, and thus there would be no need to move your stafford loans to Direct Loans at any point. Rather, you could just reconsolidate with UHEAA and bring the Stafford loans in.

Does this make sense or am I missing something?

Rathipon

What I had in mind was doing two separate consolidations right now. First consolidation is perkins with UHEAA, second is stafford with Sallie Mae. Get those both in before the deadline. Then after the deadline you can consolidate them all together with UHEAA. Since your rate would have already been locked in before July 1, you would not pay the increased rate even though the final consolidation occurs after July 1.

Best to check with UHEAA first about the feasibility of this.

Rath

Need help here... I graduated two weeks ago and currently hold a single loan, i.e. an Unsub Federal Stafford loan from the T.H.E. Loan Group. I am probably too late to go thru the two step process (T.H.E -> Direct Loan -> UHEEA) outlined above. I don't want to risk starting the process with Direct Loan and finding 90 days from now that it wouldn't work. In that case, I will be stuck with a higher rate with T.H.E.

Will the following work?

(1) I should go ahead and "consolidate" my loan with T.H.E. (get the rate fixed to 2.77%) before June 30.
(2) Once the process as T.H.E. is complete, start the process for transferring to Direct Loans.

What do you think?