Student Loan Consolidation Hot Topics

As 2007 wraps up, make sure you’re taking full advantage of your student loan payments by noting the interest you’ve paid this year on your federal student loans. As long as your income is below a certain level, interest you’ve paid on your student loans is tax deductible on your federal tax return.

If you’ve paid less than $600 in interest, your student loan lender is not legally required to send you a 1098-E form in January for interest you’ve paid. You will need to request it.

Consolidated student loans are eligible for the interest deduction as well.

Consult IRS Publication 970 for details about education tax incentives

I was speaking in the office break room with our director of student loan consolidation, Jon Rudy, about how we’re marketing our federal and private student loan consolidation products. We’re in agreement, as we frequently are, that student loan consolidation has a vital role in the education finance process.

Where I think a lot of student loan companies get hung up is on the idea of saving money for students. Student loan consolidation does not save you money over the long term if you only make the minimum payment, because at the bare minimum payment, you’ll be paying off your loan longer.

Think of it this way. If you rent an apartment, over a period of time, you’ll pay a certain amount for rent. If you rent that apartment longer, it costs you more money. If you rent a smaller apartment for longer, it will still probably cost you more money than a larger apartment for less time.

A loan is nothing more than a money rental. You’re renting money from a lender, and the interest you pay is the rent.

What student loan consolidation does is agree to reduce your rent, trading off with renting the money for a longer period of time, if you make the minimum payment.

Our perspective as a company is that students just out of school need to take a few years to get on their feet in their careers and personal finances. During that time period, a reduced monthly payment is just the thing they need. After a few years, when presumably they’re making good use of their education and degree, we strongly recommend that students step up and make more than the minimum payment, ideally making a payment that’s a little larger than the original, unconsolidated loan payment.

Because there are no early repayment penalties, they can effectively get on their feet financially and then be done with the loan in the same amount of time as if they hadn’t consolidated.

Does student loan consolidation save you money? Not necessarily. Does it reduce your monthly payment? Yes, absolutely. But more than anything else, student loan consolidation helps to buy you some time in the first years after school.

Doesn’t it seem like we were just talking about this? I swear the years go by faster and faster now…

Anyway, for all you students and recent grads out there, the holiday season can be a wallet draining time. In the spirit of saving money, Student Loan Network has pulled together a crafty list of holiday money saving tips and ideas, designed to stretch your hard earned cash a little further this year.

Have any holiday shopping tips or ideas of your own? Feel free to comment back and I will post your ideas (with your permission of course) so others can gain from your knowledge.

Some helpful information about graduated payment plans - the pros and cons.

Most borrowers who consolidate their student loans, do so in order to get some amount of monthly payment relief. While consolidation alone can cut monthly student loan payments nearly in half, a graduated repayment plan can lower that monthly payment even further.

Most graduated payment plans introduce an interest only payment for the first 2 years, followed by standard level repayment for years 3 through end of term. The initial graduated payment can be up to 45% lower then a standard level consolidation repayment plan. Here is a brief example based on a total loan balance of $25,000 at an interest rate of 6.8%:

Monthly payment before consolidation: $287

Consolidated level (standard) repayment: $191

Graduated repayment: $143 (first 2 years) $202 (years 3 - 20)

In this example, the borrower went from paying $287 per month before consolidating, down to $143 after consolidating by utilizing graduated repayment. Keep in mind, the graduated payment plan will significantly lower the initial monthly payment for the first several years, but will increase the total cost of the loan. But for many borrowers who are having trouble making monthly payments, and are at risk of going into default, the graduated repayment plan is a life saver.

Due to recent legislative changes, certain federal student loan consolidation borrower benefits will no longer be offered after October 1, 2007 for any new consolidation loans taken out. These benefits include offers such as interest rate reductions for on-time payments and automatic checking account withdrawal. The changes will not affect any federal consolidation loan that has been completed prior to October 1, 2007. The legislative changes are part of a bill titled “The College Cost Reduction and Access Act (H.R. 2669).”

H.R. 2669 contains provisions aimed to increase Pell grants through 2017, gradually cut federal student loan interest rates in half over the next 5 years, and institute several cuts to lenders and guarantors. Other provisions include Title IV loan forgiveness changes, increases for income protection allowances, and Title VIII Partnership Grants.

Borrower benefits will no longer be available due to the lender and guarantor cuts:

• Elimination of “Exceptional Performer” status which allowed lenders to receive higher insurance rates on defaulted loans
• A reduction in the insurance paid by the federal government for defaulted loans from 98% to 97%
• Reduced amount guarantors may keep when collecting on defaulted loans
• Reduced special allowance payments to lenders
• Increased loan fee lenders must pay to the Department of Education(DOE)
• Decreased account maintenance fees paid by the DOE to guarantors

A full summary of all the provisions contained on H.R. 2669 can be reviewed by visiting:
http://www.nasfaa.org/publications/2007/G2669Summary091007.html

In a nutshell, the above listed cuts will shrink lender profit margins for federal consolidation loans. With the decreased margins, lenders will no longer be able to afford offering borrower benefits. If lenders were to continue offering borrower benefits and discounts after the changes take effect, they would have to take a loss on each funded consolidation loan.

A lot more to come - stay tuned.

I would like to take a moment to welcome Kathy to the Student Loan Network, she joined our group just a few weeks ago. While I could tell you all about her myself, I think her inaugural Blog may be the best way to introduce her.

fundingyourcollegeeducation.blog.com

As always, questions about your student loans - give us a call at 877.328.1565, or check out studentloanconsolidator.com.

Because I play a minor role in the marketing dept here at the Student Loan Network, I am always keeping my eye on the other lenders - to see how they market federal student loan consolidation and loan origination to potential customers. For a few years now, I have applied time and time again on hundreds of websites, called a bunch of companies, and even applied through snail mail. It wasn’t until this morning on my way into work that I realized the most important stand alone factor for all these companies - the level of personalized customer service.

Sure, a website can be flash heavy, graphically pleasing, and packed full of rich useful content - that may be enough for some people to feel confident enough to apply. But if I was to call a company and speak with one of their customer service reps, if I don’t feel like the most important person in the universe during that conversation, I’m probably going to call the next person on the list. I’m not saying the representative should brown-nose you into applying - that would just be another dodgy sales technique. More so, the rep should simply provide their direct number/ext./email in case you have questions further down the road. Having a name and direct contact info is an important part of this transaction - after all, you(the customer) is providing sensitive personal information. And what is so difficult about having a postitive attitude?? I can’t count the number of companies I have spoken with and been totally turned off by their bitter know-it-all attitudes. Additionally, a follow up call or email several day’s later is important as well.

Long story short - our goal at the Student Loan Network is to exceed that level of service. Not because of the implied personalized marketing approach, but simply because each one of us are customers too - we have all experienced good and bad customer service in our personal lives.

So while your shopping around for a student loan consolidation over the next few weeks, make sure to look for the company who can provide you with the best overall savings - but also pay a little attention to the level of customer service you get. Give us a call today to consolidate your federal student loans at 877.328.1565, and see if we measure up.

StudentLoanConsolidator.com StudentATM.com Gradloans.com ActEducationLoans.com FinancialAidPodcast.com

Hello to all of my faithful readers! Today, a message from our top financial counselor, Christoper Penn from The Financial Aid Podcast

You’ve read the importance of consolidating your federal student loans - on CNN’s Money, in the Wall Street Journal, even in letters from senators and congressmen to their constituents. You know that consolidating your federal student loans can cut your monthly payments up to 60%, lock in today’s low rates before they jump by nearly 200 basis points (2%) this summer, and simplify your monthly bills, but you may not have known that on July 1, 2006, you may lose your chance to consolidate with the best benefits possible.

Call us now, toll-free, at 877-328-1565 or go to www.TodayISave.com to get started!

On July 1, 2006, federal student loan interest rates are anticipated to jump up by 2%, which may not sound like a lot, but for a graduate with $24,000 in federal student loans, 2% could end up costing them $5,100 more in interest - interest that you don’t need to pay! Can you think of something better to do with $5,100 than give it to the government?

Time is running out. Consolidate your federal student loans now - today - to ensure that your paperwork is being processed well before the deadline. We anticipate a massive rush of students at the 11th hour, and the unfortunate reality is that we may not be able to help all of them in time. Don’t be left behind - file your application today. There are no fees, no credit checks, no cosigners, and no early repayment penalties, so you have nothing to lose and thousands of dollars saved in interest to gain.

Call us now, toll-free, at 877-328-1565 or go to www.TodayISave.com to get started

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