October 28, 2008
Student Loan Consolidation – nowhere left to turn?
Just a few years ago, consolidating your student loans was almost a right of passage. Six months after graduating your grace period ends, and students scrambeled to consolidate the Federal student loans at the last minue while retaining that lower grace=period interest rate.
That’s just not happening any more. Private companies aren’t offering consolidations for federal loans any more. Only the Department of Education is left.
The Chicago Tribune has a great article chronicling why this is and how you can get yourself consolidated. Here’s an excerpt:
“This time of year, millions of college graduates face a reality of life after academia: With the six-month grace period on student loan repayment coming to an end, it’s time for them to start making good on their debt.
But this year, one popular option–student loan consolidation–is harder to come by.
Consolidation loans are a type of refinancing for student debt. Graduates can lump all their college loans together, merging multiple bills into one and potentially lowering the interest rate.
Lenders used to eagerly consolidate student debt.
The credit crunch has made it expensive for many lenders to raise the funds they need to create new loans. In addition, a law passed last year by Congress reduced the subsidies on federal loans that lenders receive from the government.
Virtually no private lender will consolidate federal student loans anymore. But there is another option: You can consolidate your loans through the U.S. Department of Education’s Federal Direct Loan Program.
The government has become, in a sense, the lender of last resort, but the consolidation loans are the same as those offered from private lenders. You even receive a 0.25 percentage point discount on your interest rate if you pay your monthly bill with automatic debit.”