Student Loan Consolidation Lowdown

I knew our elected representatives would be working out some kind of formula, but the recent problems made one a bit let down. Interest rates rose and student loans got higher as fees and other charges rose burdening students. The costs had become so unbearable that I wondered how long it could go on like this. Seems our representatives had the same thought and decided to do something about it. A recent plan introduced by Rep. Tom Petri would allow students who took loans to repay them through a percentage of their incomes.

This plan aims to keep student loans affordable. Students who use the plan would know that if they had trouble finding work in any given year, or if they took a lower-income public service job, their repayments would automatically be stretched out. Any balance left after 25 years would be wiped clean. Americanchronicle.com reports:

Petri’s Income-Dependent Education Assistance (IDEA) Act of 2006 would create a new direct consolidation repayment option that all federal student loan borrowers would be eligible to participate in following graduation. Petri said that unlike current consolidation options, the IDEA Act would provide two key benefits for both borrowers and taxpayers.

Read more: Petri Introduces Student Loan Plan

Students in Michigan; some good news may come your way soon in the form of extra help paying for your college education. A plan recently introduced by house democrats would pay back interest on student loans, if those students work in certain high-tech fields. Wins.com reports:

Dianne Byrum, State Representative: "The growth sectors and the jobs, we need to be training the workforce for today and into the future, rely much more on math and science, we have to be encouraging our Michigan students to go into those fields." Students must also work in Michigan for five years after they graduate. Representative Diane Byrum says an educated workforce living in Michigan is vital to turning around Michigan’s economy.

Read more:More Details on Interest-Free Student Loan Proposal

You’ve applied for financial aid with many institutes and now, as the letters arrive, your wait is over. But that is not the end of the matter. Now is when you have to make the big decision. Once the financial aid award letters come, you have to decide which aid award will help you meet your needs best. You may be tempted to take up the first offer of financial aid, but it is better to wait until you get award letters from all the colleges before making a decision. This way, your decision will be better tailored to your needs.

But don’t take too much time deciding which financial aid package to accept. These packages come with a time limitation and if you don’t respond in time, the aid may go to another student. So, while you read each letter carefully, be quick on the response to get the best financial aid package.

Interest rates have risen considerably since July1 and there is quite a bit of confusion among students. The main reason is that they don’t know how to pay off loans taken at such high rates of interest. A large number of students try to defer loan payments using the only means they know of — by consolidating their loans. Of course, consolidation is quite helpful. It helps you by creating a single fixed-rate loan plan. However, some experts believe that in the long run, consolidation may not be beneficial as the cost of doing it can be detrimental to the student.

One of the main problems is the stretched out repayment period — something that you can pay and finish off earlier is stretched for too long. This may result in an escalating interest rate stipulated by the loan holder. Whatever the reason if you do want to avoid consolidating your debts you could try these methods to reduce the pressure of your debt.

One method I recently discovered is the graduated plan. In this repayment method, payments begin at a lower rate and increase every few years opposed to a monthly payment at a fixed rate for a 10-year period. Of course, this method does have its drawbacks. If you opt for a graduated plan, at some point of time, you may be paying the highest monthly payment on a program like this. Then there is the Standard repayment plan wherein you have to make both principal and interest payments each month throughout the loan repayment period. Then there are income sensitive loans where in the amount due each month is based on a percentage of your monthly income. The catch here is that this applies for Stafford, PLUS, and SMART LOAN (federal consolidation) borrowers.

Want to consolidate your loans quickly and easily? Well, then instead of doing the rounds of consolidators’ offices or calling them up, why dont you try the Internet — you can research and compare offers and make an informed choice. Bestsyndication.com reports:

Secondly, visit a web site where you can learn about the latest trends in debt consolidation for student loans. Additionally, you can contact their financial advisors, who will walk you through the debt consolidation process and make sure that you save as much money as possible paying back your student loans.

Read more:Why Now Is The Best Time To Consolidate Your Student Loan

Student loan indebtedness is climbing each year, and large education debt can change a student’s future. How much debt a student has at graduation can affect career choices, lifestyle and family plans. news-gazette.com reports:

Student loan indebtedness is climbing each year, and large education debt can change a student’s future, Durbin said. How much debt a student has at graduation can affect career choices, lifestyle and family plans.

Read more: Cut Student Loan Rates, Senator Says

There is a bigger drama to the rise student loans, than just the percentage hike in rates. This drama that will change the way America is and will be in the coming future, and all this will be thanks to student loans. No, I’m not being melodramatic. Just ask any student about how they plan to repay their loans and what they plan to do once they’ve repaid. All you will get are confused stares. Because they don’t know when they’ll finish paying off their student loans — probably by the time they are in their mid-50s.

And how will they live their lives till then? They will have to kill all their dreams and search for that really high paying job. And the students who cannot find themselves good jobs, will have to work two or three jobs to make ends meet after they’ve paid their loan installment. And what about a home, family, children? You must be joking? Most collegians will not be able to begin thinking about buying a home or even about marriage till they are into their mid to late 30s. And then even if they want to have children, they will be forced to restrict themselves to one or none at all because of the rising cost of education.

And the worst part, society loses a great deal. Vital, but low-paying professions are being given the boot by students who cannot afford to indulge in them. What we lose out on are potential social workers, pro bono lawyers, journalists, environmentalists, teachers, artists, secondary medical professionals and community workers! This is too big a loss to even begin comprehending. I hope our lawmakers are listening.

This seems to be snowballing into a major controversy. I really don’t know what to make of it. I mean it could be true that the big lenders are really bogged down and cannot speed up the process so that students can switch financial institutions. Tens of thousands of undergraduate and graduate students DID rush to consolidate their federal student loans this spring and summer, trying to lock in lower interest payments before higher rates took effect on July 1.

I mean just the sheer numbers could’ve been enough to crash their workforce, methinks! But frustrated students think otherwise, and so do executives at some of the companies that process the applications. They are accusing big lenders like Wells Fargo, Wachovia and even Sallie Mae of violating federal regulations and slowing the process, charging the higher rates in the meantime. One such company even complained to the Education Department, which is now looking into the issue. Tech-mit.edu reports:

Banks and other lenders say that if there are lags in processing applications, they are the result of the sheer number of students who have applied to consolidate their loans; one consolidation company received 40,000 applications in June alone. There is no central database that tracks the pace of consolidation activity.

Read more: Sluggish Service Claim After Rush For Loan Consolidation

NextStudent, a major student loan consolidation lender recently doubled its loan processing staff to combat the delays in getting back Loan Verification Certificates (LVCs) from other major student loan companies. At present some of the major student loan lenders are dragging their feet and are taking their time to return the LVCs. These certificates are required to complete the student loan consolidations currently in process.

The rush to consolidate student loans prior to the July 1 deadline, when interest rates increased nearly 2 percent, created a backlog in consolidation applications across the industry. Some major lenders are reported to be using delaying tactics to prevent students from completing their applications with the lender of their choice. This increase costs for students, as they still are responsible to pay off their current loans until the consolidation is complete. This means the students have no option but wait it out while their loans hang in balance. NextStudent is trying to correct this problem by employing more resources to process the loan applications that will be released by other lenders.

The consolidation delay issue has snowballed into a major controversy now with the Education Department receiving nearly 80 inquiries about delays. Education Department officials have now stated that the department can impose money penalties on lenders and, in extreme cases, can bar them from participating in federal loan programs. Civilrights.org reports:

Banks and other lenders say that if there are lags in processing applications, they are the result of the sheer number of students who have applied to consolidate their loans; one consolidation company received 40,000 applications in June alone. There is no central database that tracks the pace of consolidation activity.

Read more: Dispute on Loan Consolidation