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Student Services Announcement: In-School Students Should Consolidate Their Student Loans in Jan. 06 to Save $$$’s – before it is too late

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January 9, 2006

Dear School Newspaper Editor, The following opinion / commentary is submitted to your publication in both a long and short format. I’d appreciate your publishing the shorter version in your “Letters to the Editor” column, and the longer one elsewhere in your paper for the financial advantage of your student body. My sincere gratitude,C. Victoria Patrick Most Students Still Attending School will Save Thousands by Consolidating their Student Loans right now – in January of ’06.

Immediately is not too soon for even in-school students to protect against the vicious anti-competitive anti-student legislation passed by both houses of the Congress during Christmas week. And the highly unfavorable to students bill is likely to be signed into law by the President in early February. This legislation, as it currently reads, will prevent students from locking-in the present in-school/in-deferment rate of 4.7% by consolidating their loans, and will further curtail most students who have ever consolidated, from shopping around for a lower rate, no matter how long their loan term or what other lender offers them a better deal.

There is, however, just time enough to “make hay while the sun shines.”

Students with Direct Loans may lock-in the current rate of 4.7% by simply contacting the U.S. Department of Education, requesting and completing an in-school consolidation application, but those whose loans are held by student lending companies such as Sallie Mae or Citibank must initially request “repayment status” with their lender, then once that is granted, ask for “in-school deferment status” before consolidating with that lender to get the 4.7% fixed rate. According to the Department of Education, “repayment status” is a requirement for in-school consolidation for FFEL borrowers (those whose loans are held by lenders other than the U.S. Department of Education’s Direct Loan program) and “in-school deferment status” guarantees the lowest consolidation rate. January 2006 IS the time to make this financially prudent move, while the Congress is presently in recess. Once the legislators return to Washington in February, this short window of opportunity could be permanently eliminated and students who failed to take this action will be stuck with repaying possibly thousands of dollars that they otherwise would not be accountable for. The gift of cash in the pocket is certainly worth the time and effort and it’s indeed worth putting one’s finger on the dial-pad to make a phone call. Once again, the deadline date to avoid being penalized by the new law is June 30, but prior to last week, the effective date was to be the day that the bill is signed into law by President Bush. Moreover, the House proposal went so far as to prohibit consolidation until after the grace period ends. Since the House and Senate bills slightly differ and may not be in final form, those in the loop in Washington cannot say for sure what the cutoff date and final terms will be. For this reason, it’s much safer for students to begin and finish the process this month. Loans that are not yet fully disbursed can easily be added on within 6 months.

Students with Direct Loans, who consolidate while still in school will retain their grace period, (the 6 month period after a student leaves school in which the federal government pays the interest on subsidized loans) but borrowers whose loans are held by private lenders in the FFEL program would forfeit this benefit. The gain, however, of locking-in the current interest rate of 4.7% far exceeds the cost of the lost interest subsidy for almost all students.

Congress has also raised the interest rates on new student loans to 6.8%, fixed, and on new parent loans to 8.5%, fixed, effective on July 1st, meaning that students and parents with unused borrowing capacity this school year would be smart to take the money now as opposed to waiting until after July 1st. And, as previously noted, the new law will also prohibit most borrowers who have already consolidated from re-consolidating, making student loans the only loan product in the country that cannot be freely refinanced when a borrower locates a better deal. Ask your congressman to explain that one.

Interestingly, not one Democrat voted in favor of the passage of these new student loan laws, but just about every Republican voted for them.

While it is true that virtually every student association and consumer group in the country has opposed these changes to the nation’s student aid programs and while their collective voices have contributed to the defeat of other even more disastrous proposals, most experts believe that only a much larger last second appeal by students and financial aid professionals to their Republican Representatives and Senators could derail these anti-competitive and anti-student laws in the face of the proposed $70 billion tax cut for America’s richest taxpayers. C. Victoria Patrick Dear Editor:

Immediately is not too soon for even in-school students to protect against the vicious anti-competitive and anti-student legislation passed by both houses of Congress during Christmas week. And the highly unfavorable to students bill is likely to be signed into law by the President in early February. This legislation, as it currently reads, will prevent students from locking-in the current in-school/in-deferment rate of 4.7% by consolidating their loans, and would further curtail most students who have ever consolidated, from shopping around for a lower rate, no matter how long their loan term or what other lender offers them better terms.

There is, however, just time enough to “make hay while the sun shines.”