best place to borrow for college costs
May 8, 2006 5:07 AM
60 Minutes last evening had a devestating report on the biggest college lending company, Sallie May. Seems they make money when loans plus interest returned; if defaulted, the govt pays tab; and additionally they own the collection agencies going after--relentlessly--those in default.
Any suggestions for a superior or decent outfit from which to borrow college money for my son, who goes off to college in the Fall.
FWIW, I have a colleague who had a really bad experience with Wachovia - I'm not sure of all of the specifics, but it was pretty rough.
posted by jmgorman at 6:19 AM on May 8, 2006
posted by jmgorman at 6:19 AM on May 8, 2006
If you're getting any federal loans, you have no choice but to go through Sallie Mae.
posted by oaf at 8:08 AM on May 8, 2006
posted by oaf at 8:08 AM on May 8, 2006
I thought that the 60 minutes piece answered the question: Federal direct loans.
posted by 445supermag at 8:22 AM on May 8, 2006
posted by 445supermag at 8:22 AM on May 8, 2006
445supermag: yes. I jotted down that name and will look into it. I tend to get second and third opinions and thus wanted to know more by way of those commenting here. I note, for example, that the reply above yours suggests that any federal loan goes through (private now) Sallie May..Why would this be so, and, if true, why two agencies rather than one, one being now private and the other governmental?
posted by Postroad at 8:39 AM on May 8, 2006
posted by Postroad at 8:39 AM on May 8, 2006
Federal direct loans are definitely the way to go... but you still in most cases have to actually get the loan through a private lender. But the terms are far more agreeable. (On preview- Sallie Mae is not the only lender that handles the federal direct loan process)
Unfortunately, in most cases Federal Direct Loans won't finance the entire cost of your educations (there are lending limits for most of their loan options) and you may or may not qualify for some of their loan packages depending on your FAFSA results.
In my case I went with Citibank to handle my federal direct loans, and the additional unsubsidized/non-federal loans that I needed to pay the remainder. So far I have been generally pleased- but then again I've also been very responsible in making sure their bill is the first one I pay every month. As the 60 Minutes piece pointed out you really get in trouble when you slip-up in your repayment, in which case the lenders are unforgiving.
posted by mhaw at 8:52 AM on May 8, 2006
Unfortunately, in most cases Federal Direct Loans won't finance the entire cost of your educations (there are lending limits for most of their loan options) and you may or may not qualify for some of their loan packages depending on your FAFSA results.
In my case I went with Citibank to handle my federal direct loans, and the additional unsubsidized/non-federal loans that I needed to pay the remainder. So far I have been generally pleased- but then again I've also been very responsible in making sure their bill is the first one I pay every month. As the 60 Minutes piece pointed out you really get in trouble when you slip-up in your repayment, in which case the lenders are unforgiving.
posted by mhaw at 8:52 AM on May 8, 2006
oaf - that's not true, you can federal student loans backed by any number of companies, and even directly from the department of education itself.
Postroad -- you'll be able to find lots of good information at the Dept of Ed's FSA website. FinAid is unrelated to the government, but had helpful information when i was looking for grad school aid a few years ago.
posted by echo0720 at 9:47 AM on May 8, 2006
Postroad -- you'll be able to find lots of good information at the Dept of Ed's FSA website. FinAid is unrelated to the government, but had helpful information when i was looking for grad school aid a few years ago.
posted by echo0720 at 9:47 AM on May 8, 2006
Why not just get a regular loan from your bank, and/or a line of credit?
posted by dirtynumbangelboy at 10:07 AM on May 8, 2006
posted by dirtynumbangelboy at 10:07 AM on May 8, 2006
When the Department of Ed has a buy back, get your loans bought back. Ed's policies on default and deferrment are very... kind.
posted by ewkpates at 10:28 AM on May 8, 2006
posted by ewkpates at 10:28 AM on May 8, 2006
I got my student loan administrated through my state - it was still a Stafford Loan, plus a Perkins (I think), but it was my residential state that administrated the loan, lending and payment. Sallie Mae was hell-and-bound for me to consolodate under them after I graduated, but I was always weary of them in some intangible way. Seems I was right. I bet nearly every state must have one of these offices, I think you could hunt them out like my parents did, by calling local government and asking them for details.
posted by eatdonuts at 11:04 AM on May 8, 2006
posted by eatdonuts at 11:04 AM on May 8, 2006
I did the Federal Direct loan consolidation. No hassles, and Sallie Mae never came in to the picture.
posted by breath at 11:09 AM on May 8, 2006
posted by breath at 11:09 AM on May 8, 2006
I went through Northstar/THE for my Federal loans - the interest rate is fixed and where the lenders screw you is on an "arrangement fee" which can be 2-5% of the total amount. Northstar doesn't charge a fee. It also has one of those "loyalty" bonus repayment options where, if you have been repaying for a few years without default, you get a lump-sum bonus which is an effective interest-rate reduction. Citibank also offers a bonus but when I ran the numbers, it wasn't as effective over a 5-10 year period as the THE one. YMMV. There's some good FatWallet threads about student loans - go here and do a search for "student".
Another thing to consider about Federal Loans is "consolidation", which is a process whereby you can get a new loan at a different fixed rate some time in the future to pay off an older loan. Hopefully, the newer fixed rate is significantly lower than the old one. People who got student loans at 8%, for example, were able to consolidate to 1.75% for a while. The trick with consolidation is the "single-lender rule", whereby it is amazingly difficult (but not impossible, just really, incredibly difficult) to qualify to consolidate a loan with a different (possibly better) lender if all your loans are from the same lender. Also, you can not re-consolidate two or more loans if they are from the same lender, but you can easily do so if they are from different lenders. So it makes to distribute your Federal loans among several lenders, if possible, to enable future flexibility.
posted by meehawl at 12:16 PM on May 8, 2006
Another thing to consider about Federal Loans is "consolidation", which is a process whereby you can get a new loan at a different fixed rate some time in the future to pay off an older loan. Hopefully, the newer fixed rate is significantly lower than the old one. People who got student loans at 8%, for example, were able to consolidate to 1.75% for a while. The trick with consolidation is the "single-lender rule", whereby it is amazingly difficult (but not impossible, just really, incredibly difficult) to qualify to consolidate a loan with a different (possibly better) lender if all your loans are from the same lender. Also, you can not re-consolidate two or more loans if they are from the same lender, but you can easily do so if they are from different lenders. So it makes to distribute your Federal loans among several lenders, if possible, to enable future flexibility.
posted by meehawl at 12:16 PM on May 8, 2006
Not sure this will help you, but my student loans originally came from Sallie Mae and I consolidated with them. I paid them for two years without a problem, they have great flexible repayment plans, and a great online interface. Then my loans suddenly got bought by ACS (owned by Wachovia), and it's pretty much been a hassle right from the beginning. From what I've been able to find out, it's impossible to get my loans transferred to any other company now that they're consolidated.
posted by geeky at 12:26 PM on May 8, 2006
posted by geeky at 12:26 PM on May 8, 2006
While Sallie Mae does not always have the best reputation for debt collecting, they do have flexible plans, easy deferments in the case of not having the money to pay, and incentives for making payments on time. (3% off loans if you make three years of payments on time) Defaulting on a student loan means actively hiding from them, and trying to get away with not paying them off. It's not having a late payment every couple of months. I was seriously late with payments to Sallie Mae several times before I got my act together. They never reported to credit agency but did call me, alot. When I quit dodging the calls, and contacted Sallie Mae directly (not the debt collection agency, we made arrangements and things were fine after that.
My girlfriend had a runin with a debt collection agency in connection with Sallie Mae. Her automatic payment had stopped for some reason and she was 60 days overdue. An agency called relentlessly, told her she was over 120 late, threatened her with legal action, and made her cry. They called again the next day, and I took the call. I told them they were in error, we had spoken with Sallie Mae directly. There was no debt, and before they call again, they had better send a letter of debt validation or we would sue them for harassment. We didn't hear from them again, but Sallie Mae did say that the debt collection was affiliated with them, and we could file a complaint, which we did.
posted by Roger Dodger at 1:47 PM on May 8, 2006
My girlfriend had a runin with a debt collection agency in connection with Sallie Mae. Her automatic payment had stopped for some reason and she was 60 days overdue. An agency called relentlessly, told her she was over 120 late, threatened her with legal action, and made her cry. They called again the next day, and I took the call. I told them they were in error, we had spoken with Sallie Mae directly. There was no debt, and before they call again, they had better send a letter of debt validation or we would sue them for harassment. We didn't hear from them again, but Sallie Mae did say that the debt collection was affiliated with them, and we could file a complaint, which we did.
posted by Roger Dodger at 1:47 PM on May 8, 2006
Definitely use more than one lender so that you have options when consolidating. One semester's stafford loans through my bank and two through Sallie Mae meant that I wasn't forced to consolidate with mohela, who held the rest of my loans.
It doesn't matter who holds the loans through college; as long as there's more than one holder, he can consolidate with whomever. I didn't have any loans through northstar, but that's who I ended up consolidating my loans with.
Like meehawl, I use northstar/THE. I'm extremely happy with them. Once your son graduates, he'll be inundated with offers from different companies who'll want to him to consolidate with them. I called about five of them and looked into the details of several more via their online calculators until I realized that in spite of all the "discounts" and "special breaks" they list, there was no difference in the monthly payments I'd end up paying. Same total principal and interest to be paid over twenty years. So why'd I pick Northstar? Well, it was the most straightforward. Those "discounts" that lenders give are contingent on requirements that can range from "must use online automatic debit payment," or "instated after uninterrupted timely payment for two years," and so on. Northstar's was automatic, as long as payments are current. If you are late, you miss that month's discount, but once you send it in, you regain it the next month. Another lender IIRC wouldn't reinstate the discount until 6 months of timely payment.
Also, I was pleased with their customer service. And they don't hassle me. I'm still getting junk mail from Sallie Mae.
posted by neda at 4:21 PM on May 8, 2006
It doesn't matter who holds the loans through college; as long as there's more than one holder, he can consolidate with whomever. I didn't have any loans through northstar, but that's who I ended up consolidating my loans with.
Like meehawl, I use northstar/THE. I'm extremely happy with them. Once your son graduates, he'll be inundated with offers from different companies who'll want to him to consolidate with them. I called about five of them and looked into the details of several more via their online calculators until I realized that in spite of all the "discounts" and "special breaks" they list, there was no difference in the monthly payments I'd end up paying. Same total principal and interest to be paid over twenty years. So why'd I pick Northstar? Well, it was the most straightforward. Those "discounts" that lenders give are contingent on requirements that can range from "must use online automatic debit payment," or "instated after uninterrupted timely payment for two years," and so on. Northstar's was automatic, as long as payments are current. If you are late, you miss that month's discount, but once you send it in, you regain it the next month. Another lender IIRC wouldn't reinstate the discount until 6 months of timely payment.
Also, I was pleased with their customer service. And they don't hassle me. I'm still getting junk mail from Sallie Mae.
posted by neda at 4:21 PM on May 8, 2006
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posted by carsonb at 6:17 AM on May 8, 2006