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Don't Buy the Hype: Sallie Mae
Advises Borrowers to Be Savvy When Evaluating Student Loan
Consolidation Offers
Tuesday March 28, 12:15 pm ET
RESTON, Va., March 28 /PRNewswire/ -- This spring more than 2
million students will graduate college and be inundated with offers
to consolidate their student loans. While consolidation may be
beneficial for most education loan borrowers -- particularly before
July 1 when interest rates are expected to increase -- it is
important that they make an educated decision.
"Consolidation is an important financial option," said Patricia
Scherschel, vice president of loan consolidation for Sallie Mae. "You
want to make the right decision, so do your homework before you sign
on the dotted line."
Sallie Mae offers tips for selecting a consolidation lender:
1. Contact your school's financial aid officer for recommendations.
The financial aid office is an excellent starting point. Many schools
offer a list of reliable and trustworthy lenders they recommend to
their graduates. Reputation and industry experience count, so choose a
lender that has been and will continue to be focused on higher
education financing.
2. Apply with an eligible lender. Borrowers who are submitting
their applications at the last minute need to make sure they send
their application to the right place the first time. Borrowers whose
Stafford or PLUS Loans are held by a single lender should contact that
lender to request consolidation.
3. Watch for false deadlines. Interest rates on Stafford and PLUS
Loans will change on July 1, not a day before. Beware of marketing
materials that use an earlier deadline for consolidation to create
panic among borrowers.
4. Don't be fooled by misleading marketing hype. Borrowers who
receive direct mail solicitations or telemarketing phone calls about
consolidation have a right to know the source of those marketing
materials. While they may appear to be coming from the federal
government, many marketing messages originate from private
consolidation brokers who get paid for each loan they consolidate.
5. Be cautious of the word "free." While lenders are not permitted
to charge borrowers a fee to consolidate their loans, Consolidation
Loans are not interest-free. It is important to understand all of the
costs up front.
6. Dig deeper into the lender's borrower benefit program. Many
lenders offer interest-rate reductions for paying on time or via
direct debit. However, borrowers should beware of lenders who tout
low, fixed interest rates when there are onerous requirements. It is
critical to understand the borrower benefit being offered, including
if, when and how you qualify for -- as well as how you lose -- the
benefit.
A borrower benefit, such as an interest-rate reduction, is of no
use to you if you do not meet the balance requirement. While lenders
typically have a minimum balance requirement, some consolidators now
have capped benefit eligibility by enforcing a maximum balance limit.
In addition, many benefits require an action on the borrower's behalf,
such as making on-time payments for a certain time period and
maintaining on-time payments to keep the benefit. As such, they are
not guaranteed.
7. Get accurate savings estimates. A borrower's savings with
consolidation will vary based on the interest rate and loan balance.
While a lender may use maximum balances and minimum interest rates to
promote significant savings examples, borrowers should get an estimate
for their own situation. Borrowers are welcome to do that with
calculators on
http://www.SmartLoan.com or by calling 800/448-3533.
8. Don't be short-sighted. Consolidation allows borrowers to extend
repayment as long as 30 years, so it is important to select a lender
that offers flexible repayment options and superior customer service,
including online account access.
For more information about student loan consolidation, visit
http://www.SmartLoan.com.
SLM Corporation (NYSE:
SLM -
News), commonly known
as Sallie Mae, is the nation's leading provider of education
funding(SM), managing nearly $123 billion in student loans for 9
million borrowers. Sallie Mae was originally created in 1972 as a
government-sponsored entity (GSE) and terminated its ties to the
federal government in 2004. The company remains the country's largest
originator of federally insured student loans. Through its specialized
subsidiaries and divisions, Sallie Mae also provides debt management
services as well as business and technical products to a range of
business clients, including colleges, universities and loan
guarantors. More information is available at
http://www.SallieMae.com. SLM
Corporation and its subsidiaries are not sponsored by or agencies of
the United States of America.
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