Financial Wellness Curriculum

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Financial Wellness Curriculum

• Loan Consolidation
• More information available at www.YouCanDealWithIt
  .com

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What is Student Loan Consolidation?

• Student loan consolidation allows borrowers to
  combine two or more existing student loans into a
  single new loan
• An extended repayment term offers a lower monthly
  payment
• Interest rate becomes fixed at the time of
  consolidation
• Borrowers with only one student loan may
  consolidate to receive these benefits as well

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Consolidation Planting the Seed Early

• Loan types that are eligible for consolidation
• Federal Family Education Loan Program (FFELP)
  Loans
• Perkins Loans (formerly National Direct Student
  Loans)
• William D. Ford Direct Loans
• Health Professional Student Loans (HPSL)
• Nursing Student Loans

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Stay Informed

• Regulation changes
• Loans no longer eligible for consolidation
• Spousal Consolidation Loans
• Early Repayment Consolidation Loans
• Repeal of the Single Lender Rule
• Borrower with multiple loans with the same lender
  may now consolidate with any lender

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FFELP Consolidation Eligibility

• FFELP Consolidation Criteria
• Loans must be in repayment status or grace status
  
• Loans must be less than 270 days past-due as of
  the scheduled disbursement date for the new
  consolidation loan
• Certain lenders may require a minimum loan balance

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Monthly Savings

• Standard Consolidation Loan at fixed interest
  rate of 7.0
• Weighted average of the interest rates of the
  underlying loans rounded up to the nearest 1/8 of
  one percent

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By the Numbers

• Consolidation vs. Stafford
• Based on loan balance of 23,000 (Stafford
  17,500 at 7.22 and 5,500 at 6.8)
• Consolidation at 6.75
• If variable rate Stafford loan, interest rate
  subject to change each July 1st, which may
• affect installment amount

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Extended Repayment Terms

• Total Education Debt Max Repayment Term
• 0 to 7,499.00 10 years
• 7,500 to 9,999.99 12 years
• 10,000 to 19,999.99 15 years
• 20,000 to 39,999.99 20 years
• 40,000 to 59,999.99 25 years
• 60,000 to greater 30 years
• Although private loans are not eligible to be
  included in a federal consolidation, it is
  recommended that borrowers list their private
  loans on their consolidation application to
  increase their total education debt in order to
  increase the repayment term.

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Consolidation Features

• Many lenders offer incentives to borrowers for
  consolidating their loans.
• Possible incentives include
• Interest rate reduction for automatic debit of
  each monthly payment
• Additional interest rate reduction for
  remitting consecutive on-time payments

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Consolidation Features

• Fixed Interest Rate
• The interest rate is calculated by the weighted
  average of all the loans included in the
  consolidation, rounded up to the nearest 1/8 of a
  percent, not to exceed 8.25
• Repayment Options
• Level
• Graduated
• Income Sensitive
• Eligibility based on comparing the monthly
  installment to a borrowers gross monthly income

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Beware of Misleading Marketing

• Tactics Consolidation Companies Use
• Rates used are best case scenario
• Often include stipulations for automatic payment
  etc.
• Reduced interest rate programs
• Be sure to research a programs requirements
• Principal rebate programs
• Up-front rebate for principal balance that can be
  reversed if requirements are not met
• No payments for first 1-2 years
• Requires a forbearance, which could lead to
  interest capitalization
• If it sounds too good to be true, it probably
  is.

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Deferment Options

• The deferment options available to consolidated
  loan borrowers are the same as those for
  borrowers who obtained their first FFELP loan on
  or after July 1, 1993.
• However, borrowers are only eligible for the
  unused deferment time on their underlying loans
  for the following deferments
• Economic Hardship Deferment
• Unemployment Deferment
• When the first FFELP loan is obtained prior to
  July 1, 1993 the terms will vary depending on the
  servicer.

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Forbearance Options

• Forbearance is a temporary suspension of a
  borrowers obligation to remit monthly payments
• Forbearance options are identical to those
  offered on FFELP loans
• Up to 36 months of Economic Hardship Forbearance,
  mandatory if the borrower qualifies
• Temporary Hardship Forbearance
• No income requirements
• Maximum allotted time is determined by the lender

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Consolidation Calculator
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Consolidation Calculator
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Consolidation Calculators
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Consolidation Calculators
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Advantages of Consolidation

• Fixed interest rate
• Loans with one lender
• Single monthly payment
• Extended repayment period
• Lower monthly payment
• No application fees or credit checks
• No prepayment penalty

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Disadvantages of Consolidation

• Longer repayment period
• Greater interest paid over life of loan
• Interest rate may be slightly higher due to
  rounding
• Possibility of limited deferment/forbearance
  options
• May lose loan forgiveness benefits
• Potential loss of loan incentives on underlying
  loans

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How to Apply Do-it-yourself

• Apply online at www.aesSuccess.org
• Call 1-800-338-5000 and speak to a loan counselor
  Monday through Friday 730am until 900pm
• Mail a paper application to
• AES Network Consolidation
• PO Box 8139
• Harrisburg PA 17105

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