Eight Misleading Tactics

Eight Misleading Tactics Marketed by Consolidators

We compiled this list from actual customer feedback on our website. We hope it will increase your awareness of some of the marketing games consolidators play:

1. You must apply by this deadline

   There are no deadlines in the Federal Consolidation Loan program. You can apply for the loan at any time during your grace period or during repayment (including during approved deferment and forbearance periods).

2. Falsely representing themselves as part of the US Government

   While federal loan consolidation is a government program, some fly-by-night marketing firms are attempting to portray themselves as the government in an effort to establish credibility (something they desperately lack). They use many tactics to achieve this, including displaying the Department of Education seal and falsely claiming to be part of the "Ford" Program. The bottom line is that only the William D. Ford Direct Program offers consolidation through the government, and chances are they won’t be marketing to you.

3. Issue the Final Notice

   This is a great one. They’re only attempting to create a sense of urgency, and the worst part is it’s never the final notice - they’ll surely follow up with many more mail pieces and telemarketing.

4. Important information about YOUR student loans enclosed

   Students have been complaining that consolidators are attempting to mislead borrowers into thinking they are being contacted by their lender, or there is an issue with their loans. The consolidators hope is that you will contact them to inquire about your existing loans. You need to be sure that it is not your lender, but once you are, you will save time and hassle by not responding.

5. We offer no fee for consolidation!

   Well that’s great, but so does everyone else in the industry, and given that Uncle Sam requires there to be no fee, I don’t think you can call it an offer.

6. Demonstrate monthly payment savings based off an 8.25% interest rate

   Some send a marketing piece that shows the savings you would realize by consolidating. The problem is they compare today’s consolidation rate with a hypothetical 8.25% Stafford loan. This rate is not current given that recent loan repayment rates are at 5.30% today.

7. Our plan has no pre-payment penalty

   Again this is another attempt to market an aspect of the program as unique when it’s actually standardized by the government. No federal consolidation loans incur penalty for pre-payment.

8. "Offer" borrower benefits for interest rate reductions

   While some lenders do offer legitimate savings in terms of a 1% reduction for timely payments, many consolidators offer these incentives with fine print. Some require that you already have your loans through the lender or disqualify loans consolidated during grace period (often the best time to do it).