Meharry Loan Consolidation Primer

[3] you will continue in school after July 1st 2006 and:

	a. you have completed in-school consolidation with additional outstanding eligible unconsolidated loans b. must choose a “blended” single consolidation or two or more new “separate” consolidations c. you have a single or multiple FFELP Stafford lenders/holders and have NOT Consolidated

You Have A Single Or Multiple FFELP Stafford Lenders/Holders And Have NOT Consolidated

Definition: FFELP Stafford loans are government-backed loans from banks or commercial lenders. Direct Stafford loans are loans that are borrowed directly from the government.

Unless you have a carefully considered, documented and verified reason NOT to consolidate, then you should do an in-school consolidation now and protect your low interest rate eligible Federal students loans from potential expensive rate increases and programmatic changes!

If you have unconsolidated student loans, you should educate yourself and identify your individual options now! Continuing students will have to abide by any legislatively authorized program changes, pay prevailing rates on subsequent post-June 30th 2006 loans and consolidations.

”Consolidating at current rates on whatever loans you already have could save you a small fortune in interest.” -- Student Borrowers Must Consolidate Now

Terry Savage, registered investment advisor, nationally known expert on personal finance and commentator on CNN, CNBC, PBS, and NBC.

You must have two different lenders to have consolidation choices. Under current (July 1st 2005 – June 30th 2006) regulations, if all of your eligible Federal loans are with the same lender and that lender offers loan consolidation, you have no choice and must consolidate with that lender. This is known as the “single-holder rule.”

This rule does not apply if all loans are with the Federal Direct Loan Program, hence if you have only one lender and do not have Federal Direct Loans you may wish to consider a “Super Two-Step” strategy. Super Two-Steps are where you first consolidate your single lender loans with the Direct Loan Program and then reconsolidate with the consolidation

It has been reported that a number of students with one FFELP lender have been able to consolidate their loans through the Federal Government's Direct Loan Program (http://loanconsolidation.ed.gov/) - (1-800-557-7392). Not all lenders agree with this interpretation. If your lender does not, and you have loans with only one lender, you may want to contact the Federal Direct Loan program or speak with another lender. However, your options may be limited. Some financial aid offices have advised students of this approach. This strategy has been success fully utilized by hundreds of students, including many Meharry members.

This “Super Two-Step” strategy provides you with the advantage of consolidation lender and borrower benefit choice. The Direct Loan Program offers only a single borrower benefit; a 0.25% rate discount for automatic debit payment. More robust borrower benefits such as the Meharry Loan Consolidation Program’s immediate 0.75% (immediate 0.50% interest rate reduction at disbursement plus 0.25% for auto debit) or 1.25% (1.0% after 36-regular on-time regular payments plus 0.25% for auto debit) which will never be lost once earned and may reduce your Post-July 1st 2005 rate to as low as 3.50% are available from FFELP consolidation lenders.

The immediate 0.75% option is recommended for those borrowers who plan to pay off their loans in 5 – 7 years. However, given the current low interest rate environment, choosing this option is generally not the wisest, financially astute decision given that there are no cost, no prepayment penalty and possible tax benefits (consult with your tax professional) for consolidating and most of your other financial obligations charge significantly higher interest rates.

Please note that Direct Loan borrowers beginning in 2000/2001 were eligible for a repayment incentive that reduced the borrowers fees at the time of loan origination from 3.0% to 1.5%. For this fee reduction to remain permanent, the borrower must make 12 on-time monthly payments once mandatory repayment begins. If the borrower consolidates with Direct Loans, the fee reduction carries forward to the consolidation loan. If the borrower consolidates with any other lender/program the fee reduction incentive is lost and added back to the loan principal. This incentive is only for loans originated with the Direct Loan program.

Although adding the 1.5% origination fee reduction back into a non-Direct consolidation appears to be a significant expense, simulations demonstrate that the Meharry Loan Consolidation Program borrower interest rate discount of 1.25% provides more savings for the borrower than if the consolidation remained with the Direct program.

Additional To Know and To Do List:

Students with all of their Stafford loans with a single FFELP lender at non-Direct lending schools can request FFELP in-school consolidation by requesting that their lender/holder put their loans into repayment.
When doing an in-school consolidation with a FFELP lender, in order to guarantee the lower in-school rate it is imperative that you follow the proper sequence of steps:

1st) Submit an In-School Consolidation Request for Early Repayment waving the grace period on Stafford student loans;

and

2nd) Place the Stafford loans into an in-school deferment status prior to the processing of the Consolidation Loan.

Do remember that the U.S. Department of Education authorization allowing private FFELP lenders to provide “in-school” consolidation as of this writing (November 2005) has been extended and is set to expire March 31st 2006.
Some lenders have been reported to have already begun denying “in-school” consolidation. In this case, it is recommended that you use the “Super Two-Step” strategy and first consolidate with the Federal Direct Consolidation Program and then reconsolidate with Meharry or the lender of your choice.
In-school single FFELP lender consolidation should be a last resort approach to locking in rates because this approach entombs the single lender dilemma; without multiple lenders, the student borrower no longer has consolidation lender choices or discount options unless they are able to consolidate with the Direct Program or obtain new eligible Federal loans from a new, different independent FFELP lender or the Direct Program.
For those who wish to have consolidation lender and discount choices and options upon graduation, you should secure a different new independent lender who will not sell your remaining Stafford loan(s) to your current single lender. Should you need a recommendation for an independent second lender please email info@Meharryloanconsolidation or info@easnetwork.com.
Do remember that FFELP lenders are not required to grant a borrower’s request to enter repayment status early.
FFELP in-school consolidations forfeit the six-month grace period for repayment following graduation. However, the low fixed interest rate and consolidation deferment and forbearance options remain available.
Private/alternative loans cannot be included in a Federal consolidation loan and private/alternative loan lenders do not qualify as second lenders for Federal loan consolidation.
FFELP lenders and programs including our Meharry Loan Consolidation Program (1.800.741.4704) and the Direct Loan Program (http://loanconsolidation.ed.gov/) - 1-800-557-7392 offers Federal student loan consolidation. Before completing a consolidation application be sure to review the Meharry Loan Consolidation Program Guide, Consolidation Discounts - TOO GOOD TO BE TRUE? (http://www.Meharryloanconsolidation.com/primer_3.html), which will assist you in understanding the fine print of discount benefits. Also visit When Considering Student Loan Consolidation - Keep in Mind for information and answers to important consolidation questions.
You want to also be sure that you fulfill all necessary requirements attendant to your status, i.e. begin repayment upon graduation, file for deferment or forbearance.
In most cases, it is strongly recommended to NOT include Perkins, HPSL and LDS loans in in-school consolidation because these loans would lose their interest subsidy if consolidated. Subsidized Federal Stafford loans continue their subsidy when consolidated. If you have eligible Perkins, HPSL and/or LDS loans that were not included in an in-school consolidation you will need to consult with a consolidation specialist to assess your options. For more information about in-school consolidation and to discuss your options, contact an experienced personal professional consolidation counselor for the Meharry Loan Consolidation Program at 800-741-4704. Be sure to reference Meharry when you inquire!
DO NOT IGNORE ANY LETTER OR NOTICE FROM YOUR LENDER OR SERVICER. Immediately reply and contact your lender/servicer or consolidation counselor to verify your situation and next steps. Always be sure to inform your lender/servicer of any and all changes in your status and contact information, i.e. name change, address change, school status, social security number.
Upon leaving school, should you wish to postpone repayment you should review deferment and forbearance eligibility criteria, qualifications and procedures and be sure to request and submit your deferment or forbearance application(s) as soon as you graduate or cease being more than a half-time student.
Make sure that you understand and confirm, in writing, the criteria and procedures for “borrower benefits”. Also see Meharry Loan Consolidation Program Guide, Consolidation Discounts - TOO GOOD TO BE TRUE? - If you don’t read and understand the fine print the benefits may never be realized!

Should you need assistance, please contact your servicer’s customer service office or an Meharry Loan Consolidation Program personal consolidation counselor. The complexity of student loan consolidation is such that you should never assume and confirm and verify (in writing) any questions you have with your lender/servicers or your consolidation counselor.