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Consolidation Checklist
- Be Aware of Aggressive marketing. Many consolidators will:
- Falsely represent themselves as part of the US government or your lender
- Impose false deadlines "You MUST apply by this deadline"
- Attempt to create sense of urgency by issuing the "FINAL NOTICE"
- Carefully research, compare, and select the optimal lender:
- Ask: Do you sell your loans historically?
- Ask: Will you lock my rate when my application is received or processed?
- Ask: What are your borrower benefits?
- Ask: Does deferment eliminate my borrower benefits?
- Ask: What percentage of your borrowers earn all their borrower benefits?
- Ask: If I earn my rate reduction, will my payment be reduced?
- Ask: Technical questions to determine customer service aptitude.
- Consolidate in your grace period for 0.6% interest rate reduction
- Base timing of consolidation on the last 91-day T-bill auction in May. If rates
increase (most likely), consolidate before July 1st. If rates decrease,
consolidate after July 1st but before the end of your grace period.
- Consider excluding fixed rate debt at higher rates. You will lower your debt cost if you exclude
previously consolidated loans or fixed rate loans at higher rates and retire them early.
- Consider not consolidating Perkins, HPSL, & LDS Loans. If applying for deferment consider not consolidating
these loans until after the deferment to maintain subsidy
- Rate is already fixed at a higher rate
- You will lose deferment subsidy if included in FFEL consolidation
- Perkins loan forgiveness eligibility is forgone
- Add private loans to consolidation application. They cannot be consolidated, but can
be used to extend your payback period (which is based on total educational debt).
- Manage debt portfolio to minimize overall costs and maximize credit profile:
- Graduated payment plan allows for lower initial obligation which
accelerates over a predetermined period of time
- Consider private loan consolidation to improve debt to income ratio
- If financing a home, make sure broker understands payment terms
- If not graduating in ’05, assess eligibility for in school consolidation.
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