Q: If a fourth year student wants to consolidate her Stafford loans, does she have to pay back the loan immediately or is it subsidized until she graduates and forfeits the six month grace period?
A: Starting July 1, 2006, students can only consolidate once and they cannot do an “in school” consolidation. Your student will have to wait until she leaves school before she consolidates. If she consolidates, she does not forfeit her six-month grace period.
Q: If a student has a Stafford loan that they are not making payments on currently, can they or should they refinance?
A: The way a student could “refinance” their Stafford loan would be to consolidate it. To consolidate the student would have to be out of school or carrying an academic workload of less than part time.
Q: Can students consolidate while in school and, if they can, can they consolidate those notes again when school is done?
A: The student can only consolidate his loan(s) if they are out of school or if their academic workload is less than one half the normal full time workload.
Q: I have two clients whose children have taken out subsidized and unsubsidized Stafford loans over the past few years. I have advised both of them to consolidate on line before June 30th and disregard the contradictory info from the financial aid office. Am I correct in advising them to do this as June 30th is around the corner?
A: Assuming these students have recently graduated or are still in school, they should consolidate their Stafford loans as soon as possible.
Q: My son is starting university this August and we are entitled to subsidized and unsubsidized Stafford loans as part of the award package. Should I sign the application before June 30th, and, if I do, will I receive a better rate? Same question re PLUS loans.
A: Stafford and PLUS loans have fixed rates that do not change from year to year.
Q: I hate to sound so mercenary, but do we get any fee for the loan consolidation?
A: Not on federal loans.
Q: If a student has only one loan for 16K that is still in deferment and the student is leaving school after his freshman year and unlikely to return, should we look at consolidating this loan?
A: The first thing you have to do is determine if the loan is a federal student loan or a private student loan. If the loan is federal, then you should consolidate and see if it is possible to extend the term of the loan.
Q: When a student graduates with additional Stafford loans at the new rate, can they be consolidated into the first consolidated Stafford loan at the low rate?
A: The additional Stafford loans can be consolidated with the first consolidation, but the interest will change. The new rate will be based on the weighted average of the loans to be consolidated and their interest rates.
Q: Does the 1.5% origination fee on the Stafford loan occur every year or just the first?
A: Origination fees are being phased out. The present fee of 1.5% will be reduced to 1% after July 1, 2008, and then by half of a percent each following July until they are eliminated on July 1, 2010.
Q: If both parents take out PLUS loans, can they consolidate them together?
A: Unfortunately they can’t. You can only consolidate PLUS loans in the name of the original borrower.
Q: I sent in an appeal letter and although they did not offer money, their written response included the following: “If you have taken out loans from the Federal Loan Program, you can provide a statement from your lender indicating the date and amounts made in calendar year 200X. We can then delete those Parent Loan payments from your 200X AGI and revise the EFC.”
A: If the family is right on the edge for need-based financial aid, it may be worth their time to get that information.
Q: If I were to take one year off and then start grad school, could I then get a loan deferment once I enter grad school? Or can I only get a loan deferment if I go right on to grad school?
A: You can get a loan deferment any time after you leave school as long as you are not in default on the school loan. So, if you are out of school for three years and then go back for your graduate work at least part-time, your Federal school loans (your Stafford and your consolidated federal loan) would go into deferment.
Q: I have a sophomore who wants to take out loans in her name. If she needs more than a subsidized Stafford loan or a Perkins loan, can she get an unsubsidized Stafford loan in her name?
A: If the student will be a junior next year, she will qualify for a Stafford totaling no more than $5,500. If she receives a Perkins loan, the maximum she could receive is $4,000. The Perkins loan is a need-based loan and the amount is determined by the college. These are the only two federal loans that she might qualify for. Other loans in the student’s name will be private loans and they will need a co-borrower. Check with the college to see if they have any loans in the student’s name for which your client may qualify.
Q: What’s the best source for loans?
A: As a general rule you want to look at the Federal loan programs first and then the various private loans.
Q: If a 1098 is issued to a student for interest on a student loan, can the parents deduct the interest on their tax return?
A: Only the person to whom the 1098 was issued can deduct the interest.
Q: I have a freshman student who can no longer depend on her parents for financial help. They did file a 2007- 2008 FAFSA form. What are the options for this student?
A: Depending on her EFC, I would see if she would qualify for a Federal Perkins Loan. The university would determine the amount if she qualified. That loan could be up to $4,000.
Next, I would go back to the university and ask if they have any loan programs for which she may qualify.
Check to see if there are any state education loans for which she would qualify.
Finally, you have the private loans, but without a co-borrower it is going to be very difficult to borrow under these programs.
Q: Have you ever heard of a student unsubsidized loan that could not be consolidated? A bank called Great Lakes Educational Loan Service, Inc has told a client that they could not consolidate the loan and they are paying a good sum of interest every day.
A: I have heard of lenders refusing to consolidate a Federal Stafford Loan because the loan amount was too small. Once a lender refuses to consolidate a Stafford Loan, the borrower is on longer limited by the “One Lender Rule” and can consolidate the loan with any lender who is willing to do the consolidation.
Q: Can we consolidate a HEAL loan that was already consolidated at 9.75%?
A: A student can only consolidate once and they have to be out of school. The exception is if the student goes back to school and takes out new federal loans for that schooling. The student can then consolidate one more time to include these new federal loans.
Q: If parents are divorced, can there be two PLUS Loans, one for each parent, in the same academic year, within the limits allowed?
A: In a divorce situation you can have two PLUS Loans in the same academic year, one in each parent’s name, but they can’t exceed the PLUS Loan limits (total cost of college minus financial aid and other deductions).
Q: I had one client who had to phone in to consolidate the direct loans and one that was able to do it online. I was wondering how we would know if it was done correctly?
A: Some lenders will send you a letter or e-mail stating that the information has been received and that the loan(s) will be consolidated on a certain date. These notices may also include the amount of the consolidated loan, the interest rate, the monthly payment and when the first payment is due. If the application is not filled out correctly, the lender may come back and request additional information. Most lenders want to do these consolidations and will work with you if the original application is just missing one or two minor items.
Q: The student who filed online has only one direct loan account number, is still in school, and has two subsidized Stafford Loans, and one unsubsidized. She listed them as three separate loans to consolidate on her form even though they are all through the same lender, have the same interest rates, and the same account number. Was this correct?
A: It’s a good idea to list the loans individually so that you can be sure you haven’t missed anything.
Q: For people who wish to be enrolled on the EDA (Electronic Debit Account), does it have to be done at the exact time of the consolidation or can it be done a few days later?
A: Client can enroll in the EDA when applying for consolidation or once it is completed. If they enrolled when applying, I have them check to make certain that they have been enrolled.
