Generation Debt

I saw the same thing in an article from MSN Money entitled " act fast: student loan interest rate soars on July 1" The one they site is financialaid.com right rate program here is the paragraph:

In the past, you were stuck once you locked in, since consolidation was a one-time-only event. Millions of borrowers who consolidated when rates were around 8% weren't able to take advantage of lower costs. But FinancialAid.com has introduced the "RightRate" program that allows consolidated borrowers to switch to a variable rate (currently 5.5%) that's guaranteed never to exceed the rate the borrowers are paying now.

Looks like the same program anyway I am going to try it just to get away from SallieMae.

My Story.

Transferred from Sallie Mae to Direct loans. Transferred from Direct Loans to another lender I found on the finaid website. 1.25% auto debit discount and 1% discount after 48 on time payments. The move cut my loan term from 30 years to 16 years.

Here is how I did it...I think this will only work until July 2007, because of the new legislation.

Below are the steps that I took to transfer my loans from Sallie Mae (who offered no discounts) to a not for profit organization who offers a 1.25% auto debit discount and a 1% discount after 48 on-time payments (2.25% total discount).

To put the discount in perspective. A 100K loan at 7% currently scheduled to be paid off in 30 years ($665 payment) can be paid of in 16 years using the same $665 payment based on the additional discounts. That is 14 years off of the loan for taking the following action:

This seems like a lot of work, but it only takes an hour to complete everything.

1. Fill out the the "Direct Loans" application online.

http://loanconsolidation.ed.gov/borrower/bapply.shtml

If you want to sign the application online, then visit the following link and request a PIN.

http://www.pin.ed.gov/PINWebApp/pinindex.jsp

After you have submitted the application it takes 4-8 weeks to transfer you current consolidation loan to Direct Loans.

2. Call Direct Loans Servicing after the loan has been funded and request a 60 day forbearance. You need to do this so you have enough time to complete Step 3 below (or you will have to make a payment). Also, get the loan information (amount, Direct loans address, rate, etc.) to fill out the application (step 3) to transfer the loan

3. Fill out the FFELP application (Federal Family Education Loan Program) on the new Lender's website. http://www.finaid.org has all the different lenders listed with their respective lender discounts available.

In my experience, the lenders that do not market the method above, will tell you this is not possible. However, it does work and all you need to do is follow the above steps.

David, which company did your ultimately move your loan to? I have been unable to locate any companies offering a 2.5 % discount. Also, how does the 48 payment discount work. Are you not eligible to receive the discount for four years?
Also, what type of fees did you pay to transfer to the consolidation company offering the discounts?

RJB -

First, there are no fees for transfering your loans. If you have already consolidated, the above steps simply transfer your loan to a different lender at the same consolidated rates (and federal benefits - disability, death, etc.).

See this website for more information regarding "reconsolidation" or more appropriately - "transfer of consoldiated loans"

http://www.finaid.org/loans/singleholderrule.phtml

I really learned about the process after I received a mailing about "reconsoldiation" and called the lender - they bascially told me how they do it, so I shopped around for all the lenders.

For a list of all of the discounts check out the following link -

http://www.finaid.org/loans/secondarymarkets.phtml

I don't want to give a specific lender because they all have different pros and cons (forbearance, fine print, etc) and don't want to seem like I am with a particular lender. HINT - But many of the state agencies don't require residency or that you went to an in-state school.

If you have microsoft excel - search help for an amortization template...then you can run 2 scenarios to see how much money you are saving. If your a finance type you can also take the present value of the savings to figure out your "real" savings.

David,

Thanks for the info it was very helpful. I am going to get right on the transfer to direct loans and then start checking the field. I hope to have the entire operation wrapped up by May. Wish me luck.

Enjoy it while it lasts. You will no longer be able to consolidate your FFELP loan with Direct Loans after 7/1/06 as per the new student loan legislation.