STUDENTS BEWARE OF
LOAN CONSOLIDATORS

BSU Financial Aid Services is warning students about

consolidating student loans from outside sources. David Tolman of

Financial Aid said these sources, which usually solicit through the

mail or over the phone, can take advantage of students who do not

fully understand the terms of the consolidation.

“Students can have low payments for the first three months

and then the payments will jump,” Tolman said.

Tolman said Boise State is a direct-loan funded school, which means

all money BSU disperses is from the U.S. government, not from an

outside bank.

“The loan consolidation, from outside sources is just like a

conventional loan. It’s like getting a credit card to pay for

your student loans.”

Tolman said students should ask some questions about repayment

incentives from outside sources:

zzzz “What is considered ‘on-time’?”

Tolman said students must be aware of the company’s

flexibility with on-time payment. With the government loans,

students can defer payments if they fall on hard times or if the

student returns to school. That is not the case with outside loan

consolidators. “It is just like a mortgage on your house, if

you are late they don’t care about your reasons,”

Tolman said.

“How many borrowers qualify?”

Statistics show that less than one-third of students qualify for

the borrower’s benefits, Tolman said.

“Is the consolidation part of the U.S. government loan

program?”

Companies cannot charge a fee for a legitimate student loan

consolidation, Tolman said. He warns students to watch the

letterhead; some companies design mailings that mimic the U.S.

Department of Education or even appear to be mailed by Boise State.

Look carefully at the company that sponsors the mailing to make

sure you know whom you are doing business with.

“Do not include your spouse’s loans in a loan

consolidation,” Tolman said.

Loan consolidations can extend a repayment period from the standard

10 years to 20 or even 30 years, depending on the loan balance.

This will increase the amount of interest paid over the life of the

loan. It also binds you to a contract for making payment to a

particular company for that repayment period, Tolman said.

“The Boise State Financial Aid office does not endorse any

particular loan consolidation program. We do recommend that

students consider a direct loan consolidation since it is through

the direct lending program that Boise State students receive their

student loans,” Tolman said.

Tolman explained the consolidation process: If a student

consolidates, interest rates are rounded up to the nearest 1/8

percent. A student performing an in-school direct loan

consolidation would “fix” the interest rate at 2.875

percent (2.77 percent rounded up to the nearest 1/8 percent). That

student’s loan would stay in deferment, and he or she would

not start making loan payments until six months after

graduation.

Tolman said a student might also secure the same interest rate if

the student is still in his or her grace period, but payments would

begin immediately.

For more information, check out the Web site for direct loan

consolidation:

“_new”>www.dlssonline.com/consolidatenow/welcome.asp

Randall Post
News Writer

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