Student Loans - federal/government loan consolidation

[abc123]

Hello all.

Just wanted to throw two cents in about federal (government) student loan consolidation, because it seems some people are still not sure about them.

I would be SUPER careful in consolidating your loans with other entities outside of the Dept of Education - as far as I know, Dept of ed gives you UNLIMITED forbearances (that means you don't have to make a payment for the month that you get the forbearance in - though interest still acrues) as well as a ton of other deferments based on unemployment, hardship, etc. (where interest doesn't accrue). Plus, you can defer paying federal student loans for as long as you enroll in school part time. So you can take a couple of classes (6 units minimum i think) at a community college for some tens of dollars, and push off having to make a payment for the semester - for as long as you take these minimum six units. It seems that they will work with you like I don't imagine any of the private consolidators will - BUT PLEASE, ANYONE WITH EXPERIENCE WITH THESE THAT CAN CONTRADICT THIS, PLEASE LET ME KNOW!

Now, these other consolidating entities, who use all kinds of "government" sounding names to sound more official and entice you, may in fact be able to give you special interest rate reductions that the Dept of Ed does not at this time, but you really need to evaluate all of this carefully - the pros and cons.

Hope that helps - good luck!

[stevie2012]

I'm not sure where you got all this information but much of which is inaccurate. I do federal student loan consolidations for a living.

1. Companies that do federal consolidations (outside the DOE) are AUTHORIZED by the DOE to do the consolidations. The entire program is federally REGULATED by the DOE.

2. The DOE does not give "unlimited" forbearances/deferments. The cap on both is three (3) years - regardless who you consolidate with.

3. Regardless who one does a federal consolidation with, the interest rate is MANDATED by the DOE (meaning, all companies much charge the same interest rate). The only thing that varies is IRR (interest rate reductions), which vary from company to company and serve as incentives. The DOE does give IRR deducations, such as .25 for ACH withdrawal.

4. Regardless who does the federal consolidation, the features and benefits are the same. Again, it's regulated by the government. The DOE can pull the plug at anytime on a company that does not adhere to its strict rules.

5. When a federal consolidation takes place (or not), student loans can be put in an in-school deferment, providing he/she is taking AT LEAST six (6) credit hours.

Hope the above provides some clarification.

[tracy1878]

we consolidated hubbys student loans with directloans, and it really got us out of a bind, they were garnishing his wages 25% and it was killing us. Then with all our other troubles lately we've fallen behind, but when we told them we had filed, they gave us a deferment until after our 341 meeting, and we won't have to pay the total past due amount, just the normal payment

[stevie2012]

What you received is an "economic hardship" deferment, which is very common for this type of situation. Any lender/servicer would have granted you the same.

There are actually two different type of federal deferments (not a ton of them): They are:

in-school deferment (at least SIX credit hours must be taken); and
economic hardship deferment.

The one benefit the DOE has is its "income sensitive" payment plan which is based on your wages versus your loan payment.

Clearly, it's always best to at least pay your interest payment so the OPB doesn't keep increasing month to month.

With the deferment, the goverment is paying the interest on the subsidized part of the loan. In a forbearance (they are much easier to get), the borrower is the one that accrues the interest on the ENTIRE loan amount, including those loans subsidized.

[StaciMM]

My loans are w/ Wells Fargo, and I've dealt with them since taking out the loans. I doubt I'll ever look into changing-they've been great each time I've needed something. (I've had more payments put into forebearance than I've made in the past 3+ years!)

I realize the benefits are tied to my student loans and aren't really dependent on the lender, but I hold to the old motto of "If it ain't broke-don't fix it!" The only thing that could have gone better is if I had talked to them sooner each time I got behind. (I had the tendency of avoiding it until I was about able to start payin again. If I had been proactive, I wouldn't have those late payment hits on my credit report. Oh well-live & learn.)

[stevie2012]

Wells Fargo has a great reputation and are regarded as one of the better lenders out there!! Now Sallie Mae is another story...