MorLee1

As Student X keenly pointed out, there are lots of companies out there who scam students and parents out of thousands of dollars when consolidating their student loans. Here’s some tips on what you should know and what you should ask to make sure you aren’t getting scammed:


What You Should Know:

– Interest Rates: Every consolidator must by federal law use the same formula to calculate your interest rate. (How it’s calculated)
– Repayment Terms: Every consolidator must by federal law offer you the same length of time to pay off your consolidation loan. (How it’s calculated)
At the same time, every consolidator must allow you to pay off your federal consolidation loan as early as you want without any penalties or fees.
– Options to Postpone Payments: Every consolidator must by federal law give you the option to delay or postpone your payments while you are in school or during times of economic hardship.

What You Should Ask:

Credibility: To evaluate a company’s credibility ask the following:
- Is the lender a “for profit” or a “not-for-profit”?
- Does the lender only do loan consolidation or do they also lend out loans like Stafford and PLUS loans?
- Does the lender have a history of selling loans?

Discounts/Savings: To evaluate a company’s discount incentives ask the following:
- Do you offer any discounts/incentives?
- What would prevent me from receiving your repayment incentive? (Examples)
- If I am required to make on-time payments - what is your definition of a “late” payment? If I request a deferment or forbearance, will I lose my repayment incentive?
- How long has the incentive been in place? Does it change often?

Service: To evaluate a company’s service ask the following:
- Can I talk to a person, not an automated system?
- Can I talk to a well-trained individual who is knowledgeable?
- Is the lenders website easy to navigate and does it provide information that educates rather than just sells a product?

For an analysis of various consolidators