alexshih said:From what i understand, other consolidators consolidate your loans based on the interest rate of this year... it jumped up quite a bit since last year 7/1. But this company setup a deal to STILL get last year's interest rate.

the 2.25% I got is AFTER the automatic payment and 36 months of on-time payment. But if I remember correctly, it is still a better deal than any of the other conslidators I've found.

graduateleverage.com - check them out. Hope it works out for you too.

Alex

Prior to July 1st 2006 all consolidations are based on a weighted average of your existing loans (your company isn't different), it is after July 1st this will change.

What incentives did they give you? Are they better than ELC's .5% immediate interest rate reduction for auto debit
and 1.25% interest rate reduction after 24 monthly payments?

EDIT: I called graduate leverage, they offer .25% auto debit rate reduction and 1% rate reduction after 36 months so no, their incentives are not as good as ELC's.

alexshih said:There's a concept in corporate finance called net present value. It basically calculates the value in today's dollars based on future cash outflows and inflation rate. It basically discounts the future value of money into today's dollars due to the decreasing purchasing power effect of inflation. The Excel formula is =NPV(...)

Since we can still get our loans consolidated at interest rates that's below the long-run inflation in the U.S. (and it looks like it's going to increase at least in the near future), I opted to go with the longest duration possible (25 years, interest-only payments for the first 3 years).

The way I see it, I can take my time to pay off the student loan, letting inflation decrease the cost of my loan.

And if I want really want to peace of mind that comes with paying off loans early, I'll just setup a separate account that will hold the money I put aside for paying off the student loan. I can put money into that "lock box", as the politicians like to say it, until I there's enough to completely pay off the loan. The monthly payment will be automatically withdrawn from that account and I wouldn't have to worry about it. I also get an additional benefit by arbitraging the difference between the loan interest rate (2.25) and the savings account interest rate (~4.5%).

Alex

Good idea, but you have to take into account the tax consequences of the plan. If you're in a lower tax bracket, you likely qualify for a student loan deduction, so your interest paid and interest earned will cancel each other out somewhat. If you're in a higher tax bracket and you're unable to deduct your interest paid, but have to pay nearly 40% marginal federal taxes and if you life in a state that has around 10% state taxes, your effective savings account interest rate is nearly the same as the student loan. The concept is simple and it's a good idea if the amount if big enough, but to actually do it involves a moderate amount of time and hastles. Missed payments, extra interest paid, late fees, etc may cancel out any small benefit. Economic changes may also reduce savings rate you get, while your loans remain fixed. Or you might get luck and the gap increases. That's the risk you take which is why there's the potential benefit. In addition, there are advanced ways to make it even more by buying bonds, stocks, or real estate, but the risk goes up with each.

checked out a few more lenders and ELC is still on top.. however:

they historically sell loans but they have in writing that the borrower benefits will be guaranteed for the life of the loan, regardless of whom they sell the loan to.

they do honor the grace period even if you consolidate in grace.. i.e. if you're graduating this month and you consolidate your stafford loans, they will lock in the rates now but won't require payment until november 2006. Is there a term for this? because only ELC appears to be offering this and no other lender will honor grace .. they are requiring payment within 60 days of consolidation..


that's it. I have $30K in stafford subsidized loans (from multiple vendors) and $10K in perkins.. and am working with ELC to find out what the best option is.. whether to consolidate together or to consolidate only the stafford loans.

I am a graduating medical student with federal Stafford loans of ~$160k. Last year, I consolidated my loans through my lender T.H.E. and locked in a FIXED interest rate of 2.875% repaid over 30 years. This year, I will also consolidate my senior year loans (~$40k), but I am not sure which lender to use. The previous lender is giving me a rate of FIXED 3.875% rate, with rate reduction of 0.25% to 0.75%. This is pretty much the "going rate" for all student loan lenders... except for one.

http://www.graduateleverage.com/

Graduate Leverage suggested I consolidate my fourth year loans together with first three years, and they can STILL get the 2.85% rate. Even more unbelievable (literally), is that they claim to knock off 1% after 36 consective payments, bringing it down to FIXED 1.85% over 30 years!

Basically, these guys are Harvard MBA grads who serve as a middle man and negotiates with lenders on behalf of ~30,000 professional/graduate students. They claim that, in this way, they can get better benefits, better rates. They seem to know how to utilize loopholes and tricks to get the best rates. In writing, they negotiated the terms so that the lender states that they can never sell the loans. When calling their CSR, they seem very knowledgeable with quick response. Many classmates are bypassing the school's financial aide office "recommended" lenders and go with these guys. As of yet, there have not been any problems.

1.85% is a fantastic rate... below inflation rate even. The way the lenders make money, from how they explained it, is that the government guarantees are rate of return for the lenders... something called the SAP paper rate, or something like that.

The loan servicer is Student Assistance Foundation: http://www.programs-safmt.org/Programs/
The actual lender of the loan is Brazos Higher Education Service Corporation. www.bhesc.org
and originated by US Bank.

Issues:
1) What is the catch? Nobody else comes even close to those rates. Graduate Leverage is relatively new (~3 years).
2) No one is currently in re-payment. The time I am worried about being screwed is not now or even next year but when it comes time to pay off the loans when the fine details of the terms conditions come into play. Graduate Leverage claims that many business students are already in repayment without problems.
3) Worst case scenario is that their benefits don't come through, in which case, I will be paying an interest rate closer to the 3.85%. It will end up about $12,000 more expensive than the offers by T.H.E. (the "safe" traditional route). Graduate Leverage claims that anywhere from 60-90% of their students get the benefits.
4) The terms and conditions they provide are online, but seem very generic (not individualized) and not very detailed.

Should I "go the safe" route and go with the traditional lenders but pay a higher rate at 3.85%? Or should I go with Graduate Leverage?

Thanks!! Sorry this is so long, but $160k is a lot to be risking a free lunch for.
-Ted

graduate leverage seems to be good for existing consolidated loans but their benefits are not as good as ELC for those seekign to consolidate for the first time..

Roostar said:Can you consolidate and then defer somehow? I am graduating this semester but plan on going to law school next year (in 07).

You can put your loans in deferment once you matriculate at law school. So for the year you're working/goofing off/whatever, you have to pay your loans. But at least for federal loans, just let your lender know when you're going back to school, you might have to fill out a form for an in-school deferment.

zmre2b9 said:jcohen73 said:Has anyone given any thought to the "guarantee" of these discounts? For anyone who has consolidated loans already, these discounts are not written in any loan documents at all, hence no guarantee to get them. Now, I do not worry much about consolidated loans by government entities, some of these others could be an issue. For example, what if a private loan company goes bankrupt, you will still owe the money to whoever takes over the loans. That new loan holder does not have any obligation or reason to give the borrower any discount. Come July 1, 2006 there are no more fixed rate loans, so if this concern of my happens, you are stuck.

Maybe I have missed something, but don't think so. People might want to consider, do they want to take a chance with a private lender to save an extra .25?

It's not for an extra .25 -- it's for more than that. why misrepresent the savings?

But I agree that some student loan copmanies (e.g., sallie mae) are scum bags and might try to renege on the offer. But student loan companies are not likely bankruptcy candidates -- their loan portfolios are guaranteed by the US or some other (quasi governmental) student loan guarantor.

More likely is that they would try to say one of your payments was late or they'd change the due date or something. Those things can be avoided by doing direct debit.

Also. to protect yourself, save copies of all the documentation that show the terms the offer (e.g., the web page or whatever). Save that documentation. If they screw with you, use that documentation and file a claim in your local small claims court or federal court or whereever you like. That will get their attention and they will likely decide that they are better off upholding their promise than adding another job for their own lawyers whose cost would exceed the amount in dispute. But there is virtually no chance that you would need to do this (as long as sallie mae isn't your lender).

I compared the private to quasi government agencies, when i said .25%. For example UHEAA (stands for Utah Higher Education Assistance Authority - a agency of the state of Utah) is a government agency, so I have misrepresented nothing. The loans are guaranteed by the US government. The LENDER is NOT guaranteed by the US government, and it is the lender offering those discounts, so maybe you misunderstand the possible issue. I am not an attorney, but I have dealt enough with loans in my life already to know if it is NOT in writing, it is worthless. Forget what verbally was said, what was put on a website. Your terms on in black and white on your loan document, end of story! And as someone who has consolidated loans, I can assure you the interest rate stated on the loan documents in no way mention any discounts. And anyone can feel free to discuss this with consolidation companies, they will tell you the discounts are NOT in writing and ARE NOT guaranteed. They will tell you long winded stories, but they will not give you anything that gives you in writing gauranteeing the discounts.

If a lender that you consolidate with does go bankrupt, just like a mortage company, the loan is still owed. Any "special" deals you had are out the window. These consolidation companies are in the business of making money, they CAN lose money, it IS possible for them to go bankrupt.

zmre2b9 said:jcohen73 said: I compared the private to quasi government agencies, when i said .25%. For example UHEAA (stands for Utah Higher Education Assistance Authority - a agency of the state of Utah) is a government agency, so I have misrepresented nothing. The loans are guaranteed by the US government. The LENDER is NOT guaranteed by the US government, and it is the lender offering those discounts, so maybe you misunderstand the possible issue. I am not an attorney, but I have dealt enough with loans in my life already to know if it is NOT in writing, it is worthless. Forget what verbally was said, what was put on a website. Your terms on in black and white on your loan document, end of story! And as someone who has consolidated loans, I can assure you the interest rate stated on the loan documents in no way mention any discounts. And anyone can feel free to discuss this with consolidation companies, they will tell you the discounts are NOT in writing and ARE NOT guaranteed. They will tell you long winded stories, but they will not give you anything that gives you in writing gauranteeing the discounts.

If a lender that you consolidate with does go bankrupt, just like a mortage company, the loan is still owed. Any "special" deals you had are out the window. These consolidation companies are in the business of making money, they CAN lose money, it IS possible for them to go bankrupt.

ELC is more than .25% cheaper than Direct -- the primary government lender.

Is your scenario of the lender going bankrupt or otherwise cancelling the discount based on any actual evidence or even anecdote? Or did it just come to you in a dream? It doesn't seem like a plausible scenario to me and thus I don't see the risk being sufficient to make me pay more money in interest to avoid such an unlikely scenario. Since the loans are guaranteed by the gov, that *protects* the health of the lender -- even the for-profit lender (indeed -- the for-profit lenders are making free money on the backs of taxpayers: they are loaning money essentially risk free (b/c it's guaranteed) and collecting high risk interest rates (even the low interest rate loans are subsidized by the govenrment so they are collecting more interest than we are even paying them). The for-profit lenders are not going bankrupt -- not by a long shot. Read the Sallie Mae 10-K. They are printing money over there.

And anyway, you don't need to be a lawyer to know that websites are in writing and constitute terms of an offer which you accept. Sure the worst of them will try to screw you by playing games and not give you what they promised (sallie mae) and try to argue that the fine print of the promissory note trumps the large print of the website but I'm telling you, if they do that you just file a complaint against them, they will know they are better off just settling with you than losing on their misleading website. And yr lender is not going bankrupt -- the lender lobbyists insured that.

But different people have different risk tolerances; I think the risk that the lender will cancel the discount unilaterally is an extremely low risk and is not worth considering except for really bad lenders (did I mention sallie mae?) Although the risk that you will screw up a payment somewhere along the way if you don't have auto debit, thereby losing the benefit is a likely scenario and should be taken in to account.

Bottom line:
1) don't use sallie mae or any other lenders that people complain a lot about
2) save copies of all documentation of any offers
3) get auto debit

Meanwhile, I'm intrigued by graduate leverage and would like hear if others have any experience with them.

Well Mr Smarty, maybe you can explain some stuff to me. Here are some stuff STRAIGHT off of UHEAA website under disclosures, which is similiar to all the ones I have seen so far...

Maybe after you read this you can explain and enlighten us how how discounts are guaranteed as you have implied and suggest we should take them to court if they change.

UHEAA Borrower Benefits Program Disclosure Statement
(Effective March 23, 2006. Subject to change without notice. Terms and conditions apply.)
Guarantee Fee Benefit:

UHEAA's Secondary Market Loan Purchase Program (LPP) will pay the 1% guarantee fee to the Guarantor on behalf of the borrower.

Automatic Payment Benefit:

As long as LPP holds the loan, UHEAA will reduce the interest rate charged to borrowers on Federal Stafford and Federal PLUS loans first disbursed on or before June 30, 2007 by 1.25% (Federal Consolidation loans disbursed on or before April 30, 2006 receive the 1.25% rate reduction). For Federal Consolidation loans first disbursed on or after May 1, 2006, UHEAA will reduce the interest rate by .50%, This benefit active during any period in which the borrower makes payments automatically from a checking or savings account through UHEAA’s Automatic Payment Benefit program, subject to the following:

Timely Payment Origination Fee Credit Benefit:

For Federal Stafford or Federal PLUS loans guaranteed by UHEAA prior to May 1, 2000 and first disbursed on or after January 1, 1995, UHEAA will credit to the borrower’s principal balance an amount equal to the Origination Fees paid by the borrower in excess of $240 after the borrower pays the first 24 monthly payments on time, subject to the following:

* The Timely Payment Origination Fee Credit Benefit will apply as long as LPP continues to hold the loan.
* The borrower is allowed to make three late payments between 15 and 30 days after the due date without losing eligibility for the Timely Payment Origination Fee Credit Benefit.



UHEAA Borrower Benefits Program Disclosure Statement
(Effective March 23, 2006. Subject to change without notice. Terms and conditions apply.)

Guarantee Fee Benefit:

UHEAA's Secondary Market Loan Purchase Program (LPP) will pay the 1% guarantee fee to the Guarantor on behalf of the borrower.

Automatic Payment Benefit:

As long as LPP holds the loan, UHEAA will reduce the interest rate charged to borrowers on Federal Stafford and Federal PLUS loans first disbursed on or before June 30, 2007 by 1.25% (Federal Consolidation loans disbursed on or before April 30, 2006 receive the 1.25% rate reduction). For Federal Consolidation loans first disbursed on or after May 1, 2006, UHEAA will reduce the interest rate by .50%, This benefit active during any period in which the borrower makes payments automatically from a checking or savings account through UHEAA’s Automatic Payment Benefit program, subject to the following:

* In order to qualify for the Automatic Payment Benefit, all of a borrower's loans serviced by UHEAA must be set-up for automated payments.
* Loans that are in repayment status qualify for the Automatic Payment Benefit after the account is set-up for automatic payments from a checking or savings account. Loans in deferment, forbearance or grace status are not eligible for the Automatic Payment Benefit. An Automatic Payment Benefit application received for a loan in deferment, forbearance or grace status will be processed once the loan enters repayment.
* The Automatic Payment Benefit interest rate reduction remains in effect as long as the loan(s) are paid by automated payments.
* The Automatic Payment Benefit will be canceled if the loan has more than one returned transaction (e.g., non-sufficient funds) within any 12-month period. In the case of a second returned transaction, the interest rate reduction is ended and the interest rate returns to the current statutory rate. The borrower may re-apply for the Automatic Payment Benefit after making on-time payments for 12 consecutive months by cash, check or money order. The borrower’s loan(s) will not become eligible for the Automatic Payment Benefit for a period of 12 months from the date of the occurrence of the 2nd returned transaction. Lump-sum payments will not accelerate the re-establishment of eligibility.
* Loans accrue interest at the federal statutory rate, not the reduced rate, during periods of deferment and forbearance. During periods of deferment, the U.S. Department of Education will pay the accrued interest on subsidized loans at the statutory rate.
* The automatic payment withdrawals and Automatic Payment Benefit automatically resume upon expiration of a deferment or forbearance.

Origination Fee Credit Benefit:

For Federal Stafford and Federal PLUS loans guaranteed by UHEAA on or after May 1, 2000 and before July 1, 2007, UHEAA will credit to the borrower's principal loan balance, upon purchase of the loans by LPP, an amount equal to the Origination Fee originally deducted from the borrower's loan proceeds, subject to the following:

* Federal Stafford or Federal PLUS loans purchased by LPP and then immediately paid by a Federal Consolidation loan are eligible for this credit. Federal Stafford or Federal PLUS loans paid by a Federal Consolidation loan prior to LPP purchasing the Federal Stafford or Federal PLUS loan are not eligible for this credit.
* The Origination Fee Credit Benefit is applied to the account balance within 30-60 days of loan purchase by LPP.
* The Origination Fee Credit Benefit can only be applied as a credit to the loan principal. The borrower may not receive a direct refund. In the case of a payment in full prior to receipt of the credit, the credit is posted to the principal loan balance and any overpaid amount is refunded to the borrower by check.

Timely Payment Origination Fee Credit Benefit:

For Federal Stafford or Federal PLUS loans guaranteed by UHEAA prior to May 1, 2000 and first disbursed on or after January 1, 1995, UHEAA will credit to the borrower’s principal balance an amount equal to the Origination Fees paid by the borrower in excess of $240 after the borrower pays the first 24 monthly payments on time, subject to the following:

* The Timely Payment Origination Fee Credit Benefit will apply as long as LPP continues to hold the loan.
* The borrower is allowed to make three late payments between 15 and 30 days after the due date without losing eligibility for the Timely Payment Origination Fee Credit Benefit.
* The borrower is immediately disqualified from the Timely Payment Origination Fee Credit Benefit if a payment is 31 days or more delinquent.
* The Timely Payment Origination Fee Credit Benefitis the net amount of origination fees charged to the borrower in excess of $240. To qualify for this benefit the total indebtedness of a borrower’s loans held by LPP must exceed $8,000.
* Periods of time when a loan is in deferment or forbearance are not used to calculate the 24 month time period.
* Lump-sum payments count as eligible monthly payments if the due date is advanced. If the borrower instructs UHEAA to post a lump sum payment as a principal reduction and advises UHEAA not to advance your due date, the lump sum amount will count as one monthly payment.

Timely Payment Benefit:

For Federal Stafford or Federal PLUS loans that first began repayment on or after January 1, 1993, and Federal Consolidation loans originated on or after January 1, 1993 and before April 30, 2006, UHEAA will reduce the interest rate 2% if the borrower pays the first 48 monthly payments on time. For Federal Consolidation loans originated on or after May 1, 2006, UHEAA will reduce the interest rate 1% on Federal Consolidation loans if the borrower pays the first 36 monthly payments on time for loans originated on or after May 1, 2006, subject to the following:

* The interest rate reduction will apply as long as LPP continues to hold the loan.

So Mr. Know it all, please explain to me this disclaimer. Do you notice repeatedly how it says as long as LPP holds the loan you get the discount? You know loans get sold all the time? What ensures they don't sell your loan and you don't lose your discount? Do you also notice the disclaimer says they have the RIGHT to change these discounts whenever they want? And if you think because loans are guaranteed companies don't go bankrupt, you need to take some business classes.

Ah its no wonder our country is in such trouble, look at how our "educated" people can't read. Yet want to mock everyone who sees what their little brain does not...

sorry to hijack the the thread, but I'm wondering if anyone can help me out:

I'm currently at just under $20k in student loans and I will be graduating in a month. It seems that all the lenders that I have looked at require a 20k or more balance in order to qualify for a % discount for timely payments. Anybody know of a good lender that doesn't require this balance for that discount? Thanks.

am23 said:sorry to hijack the the thread, but I'm wondering if anyone can help me out:

I'm currently at just under $20k in student loans and I will be graduating in a month. It seems that all the lenders that I have looked at require a 20k or more balance in order to qualify for a % discount for timely payments. Anybody know of a good lender that doesn't require this balance for that discount? Thanks.
Call your financial aid department and get an additional loan disbursal for an amount that pushes you over the $20,000 mark. This assumes you haven't taken your maximum federal loans for the year. I contacted my student loan office at the end of the spring semester last year to borrow extra money under last year's rate rather than wait for this year's higher rate.

Use the extra money to pay off higher interest loans if you have them. Or cough up the 3% origination fee on the new loan amount (to save more in the long run by fixing your interest rate) and put your new loan money to pay off your student loans as soon as they are consolidated.