What is The Difference Of Consolidating Private VS Federal Student Loans?

Contrary to popular belief, private loans can be consolidated. Here is what you should know if you have them and are considering consolidation.

1. Do not consolidate them with federal loans even if they provide the option.
2. They can’t consolidate until you’re out of school and beginning repayment.
3. In most cases, consolidating private loans will leave you with a variable rate loan and it will not typically fix your loan rate (like federal consolidation).
4. Keep in mind that the best option is often to leave them alone. How to know?

Remember that federal student loans are subject to unique terms and conditions and may not be combined with the Student Loan Consolidator Private Consolidation Loans. You need to take advantage of separate federal and private consolidation loans companies for this.

Look at the benefits of your current lender. There are only about ten lenders that will consolidate any private loans. Most companies require that you have loans with them to be eligible to consolidate with them.

The amount will vary, some will require that you have one or more loans with them some and will require 50 percent or more of the consolidating amount be to with that lender. Researching your lender is a good start.

You should shop around and as mentioned, there are few companies that don’t have stipulations in order to use their consolidations or refinance programs. Here’s a published list: http://finaid.org/loans/privateconsolidation.phtml. The lender, not the government, dictates the interest rates provided and most are linked to the Prime Rate.

Most Often Asked Questions Regarding Consolidation Of Private Student Loans

Is there a certain loan amount that must be considered for private consolidation of loans? Yes, the minimum loan amount is $7,500. And the maximum amount is $300,000.

How can I find out how much I owe and when my private student loans will be approved for consolidation? By reviewing your most recent monthly statement and checking your on-line access to your account balances. And once your required documentation has been received, a loan decision and if approved, will begin the process of paying off the loans you listed for consolidation. Once completed, you will be sent a letter of confirmation.

Regarding interest rates, what is the interest rate on my loan after the first year and can I make interest-only payments in my second year? On the first anniversary of your loan closing, the interest rate on your loan changes to Prime Rate or LIBOR plus 5.oo percent to 5.75 percent, depending on your credit history or if you have a co-signer.

During the second year, you are still eligible to make interest-only monthly payments. It is only on the second anniversary of the loan closing that you will be required to make principal and interest payments.

Which types of loans are eligible to be consolidated in the Private Student Loan Consolidation Program? Any existing nationally marketed private student loan is eligible for the Student Loan Consolidator Private Consolidation Loan. Federal student loans, home equality loans and credit card obligations are not eligible for consolidation.

If you are unsure whether a loan may be eligible please call the customer support center at 866-496-5787.

What Is Sallie Mae?

It’s the nation’s leading provider of student loans and administrator of college savings plans, which has helped millions of Americans achieve their dream of a higher education. The company primarily provides federal and private student loans, including consolidation loans, for graduate students and their parents.

In addition, Sallie Mae offers comprehensive information and resources to help students and parents through their journey with professional guidance during this process. Sallie Mae owns and manages student loans for nearly 10 million customers. They administer more than $18 billion in college savings accounts for 1 million customers through the Upromise subsidiary and employs approximately 12,000 individuals at offices nationwide.

Sallie Mae operates their main servicing centers in the following cities and states: Gilbert, Arizona; Panama City, Florida; Indianapolis, Indiana; Mount Laurel, New Jersey; Wilkes-Barre, Pennsylvania, and Killeen, Texas, as well as 72 other offices throughout the United States.

Sallie Mae is listed on the Fortune 500 and is one of the Top Innovators in IT according to Information Week. The National Association also has recognized the company as one of the top 30 companies for executive women for Female Executives.

Where Is Sallie Mae’s Past?

The company remains the country’s largest originator of federally insured student loans. Through its specialized subsidiaries and divisions, Sallie Mae also provides debt management services as well as business and technical products to a range of business clients, colleges and loan guarantors.

The Student Loan Marketing Association was originally created in 1972 as a government sponsored enterprise and began privatizing its operations in 1997. In 2004 the Congress terminated the process by Federal charter. The company remains the country’s largest originator of federally insured student loans.

Through its specialized subsidiaries and divisions, Sallie Mae also provides debt management services as well as business and technical products to business clients, colleges, universities and loan guarantors.

In August 2006, Salle Mae acquired Upromise, a company that provides rebates to buyers of certain brands, which can be applied to college accounts. Sallie Mae and Upromise plan to market comprehensive financial packages to parents and students, for financial aid information and student loans.

The company primarily provides federally guaranteed student loans originated under the
‘Federal Family Education Loan Program’ (FFELP) and offers resources to assist students, parents, and guidance professionals with the financial aid process.

The Controversies Of The Sallie Mae Program

In February 2007, New York Attorney General launched an investigation into alleged deceptive lending practices by student loan provides. At the end of the investigation Sallie Mae announced that they voluntarily agreed to change its lending standards to satisfy a new code of conduct for student loan practices and donate $2 million to a fund devoted to college bound students.

Many Internet sites document problems with Sallie Mae customer service and repeated telephone calls. Sallie Mae is extremely aggressive in its collection procedures.

Also, Sallie Mae is exempt from many fair debt collection practices due to extensive lobbying. This includes taking on huge penalties that can quadruple the amount they can collect as well as exemption from standard withholding practices.

Why Are Private Loans Growing?

People are looking for personal loans every day. And private student loan volume is growing much more rapidly than the federal student loan volume, which is difficult to understand given the benefits of the two. And remember, student loans are very different than guaranteed online personal loans.

If the current trends continue, annual private education loan volume will surpass the federal volume within a decade. It is very important that students have the correct tools they can use to compare the different private student loans to learn and understand the validity and scope of the one they choose.

It is also very important to keep in mind what the lender is looking for. The issues here will affect many factors of your personal loan. Students and other people come in and out of the door everyday and the lender is aware of the questions and the necessary feedback qualifying the borrower for the loan.

Impressing A Private Lender

The lender will want to know about your past record in finance such as bankruptcy and credit rating. If you have had problems in either of these areas you must be prepared to go with a secured loan. Here you have to be willing to put something up as collateral that the lender can take if you fail to pay back your loan.

The higher amount you plan on asking for, such as $15,000 or $20,000, (or even more because of the extreme cost of school) be prepared for private banks offering the loan to charge high interest rates on monies funded to borrowers.

Also, you need to work with your lender and build a good relationship so he or she knows what you are expecting. A loan such as this should be borrowed for a very short term. Otherwise this type of loan would not make sense.

Best Private Student Loans

Most of the above seems rather negative, and I agree. However, these are the items that would be first researched from a lender with a student starting college. Now let’s go on to the positive side of the picture regarding finding “your” best private student loan.

As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan, grants, work-study, Federal PLUS Loan, etc.

The fees charged by some lenders can significantly increase the cost of the loan. A loan with a low interest rate but high fees can ultimately cost more than a loan with a somewhat high interest rate and no fees. The lenders that do not charge fees often roll the difference into the interest rate. A good rule of thumb is that 3% is fees is about the same as a 1% high interest rate.

The best private student loans will have interest rates of LIBOR + 1.8% or PRIME – 1.00% with no fees. Such loans will be competitive with the Federal PLUS Loan. These rates often will be available only to borrowers with great credit who also have a creditworthy co-signer.

It is also not uncommon for lenders to advertise a lower rate for the in school and grace period, with a higher rate in effect when the loan enters repayment. So be aware and read, read and read some more.

Not To Worry About What Private Lenders Are Looking For

You will be able to find a lender for a private loan, that will not be your problem! There are many, many lenders that are more than willing to lend you money even over the Internet without ever seeing you. The problem will be what you will have to pay in return, and be held accountable for. That will be far more important for you in the long run.