Session 35.pptVIP

1 of 2 Title IV Consolidation Loans Kristie HansenPolicy Liaison and ImplementationUS Department of Education Agenda July 1, 2005 Rate Change Title IV Consolidation Loan Review Dear Colleague GEN-05-08, FP-05-05 Future State Questions July 1, 2005 Rate Change What is it? Student loan (DL and FFEL Stafford loan) variable rates for in-school, in grace, in deferment status increased 1.93% over ’04 rates (now 4.70%, were 2.77%) July 1, 2005 Rate Change Student loan variable rates for repayment and forbearance status increased 1.93% over ’04 rates (now 5.30%, were 3.37%) Huge response to get a fixed consolidation loan interest rate based on underlying loans that were at the pre-July 1 rates. Title IV Consolidation Loan Review Title IV consolidation loan: New loan comprising (and paying off) existing student loan obligations Established in 1986 for FFEL, 1992 for DL Offered by DL and FFEL eligible lender Total of existing principal amount of obligations in new form Prior obligations are paid in full Title IV Consolidation Loan Review Loans eligible for consolidation: DL and FFEL Stafford loans Perkins loans Existing Title IV consolidation loans DL and FFEL PLUS loans Health Education Assistance Loans (HEAL) Title IV Consolidation Loan Review Federal Insured Student Loan (FISL) Health Professions Student Loans (HPSL) Loans for Disadvantaged Students (LDS) Nursing Student Loans Fed. Supp. Loans for Students (SLS) Loans to Assist Students (ALAS) Title IV Consolidation Loan Review Advantage for Borrower: Fixed interest rate based on current low variable interest rates on underlying loans Longer repayment period, lower monthly payment Title IV Consolidation Loan Review If loans scattered, obtain single holder/servicer; single payment Defaulted loan(s) can be consolidated out of default under certain circumstances. Title IV Consolidation Loan Review Disadvantages for borrower: May lose existing incentives offered by current holder May lose some deferment and cancellation r