Last week The Department of Education announced that as of March 31, 2006 many students will no longer have the right to choose the lender they wish to consolidate with. An estimated 40% of students eligible for consolidation may be affected by this regulation.
Last week The Department of Education announced that as of March 31, 2006
many students will no longer have the right to choose the lender they wish to consolidate with. An estimated 40% of students eligible for consolidation may be affected by this regulation.
The Department of Education’s announcement specifically restricts all Two-Step Student Loan Consolidations that are not completed by the deadline. “Unfortunately this is a troubling regulation for students with loans. Students will no longer have the right to shop for the best incentives which may ultimately cost them hundreds to thousands of dollars” said Mary Montiel at Collegiatefunding.com.
The Department also included in its announcement that it will no longer allow the re-consolidation of Direct Loans after July 1, 2006. In the past a student who had consolidated with Direct Loans could shop for a better incentive and reconsolidate the loan. The Department will now force students to go back to school and take out a new loan to be eligible for this type of consolidation.
This comes on the heals of the Deficit Reduction Act that was passed earlier this year. The Deficit Reduction Act raises student loan rates to a 6.8% fixed rate on all new loans and no longer allows in school consolidations after July 1, 2006.
“It is a sad day for students. We are expecting interest rates to increase to the mid 6% range or even higher on July 1, 2006 compared to 4.7% today,” said Mary Montiel. “Now without the ability to shop for additional rate reductions of sometimes as much as 1¼%, it is the students who will suffer while in repayment”
Students are urged to consolidate by March 29th, making sure to consolidate with a company who offers e-signature and a good incentive program. This will ensure they meet the March 31st deadline.
