Time to consolidate student loans
Graduates may be inundated with offers. Here's some advice from the experts.
By Chris Gaylord | Staff writer of The Christian Science Monitorfrom the May 14, 2007 edition
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Elizabeth Hira has seen the pitch many times before.
Since graduating last June from Stanford University, Ms. Hira has received piles of postcards and letters, littered with exclamation points, percentages, and the infamous tagline "consolidate now."
"I feel like a fugitive," she says about the flood of offers from lenders to consolidate her student loans. "I've been out of school for a year, and they're still trying to track me down."
As she considers attending graduate school, Hira has held off consolidating her loans. She'd like to say that's the only reason she's wavered.
"Really, I'm not sure what to do," she admits. "There's just a lot of confusing information out there, and I have yet to find a legitimate and impartial source."
With news of student-loan scandals and new laws giving borrowers more options, figuring out whether to "consolidate now" is trickier than ever. While there are more choices this year – some great, some deceptive – students and recent graduates shouldn't fret, says Kevin Walker, CEO of the loan comparison website SimpleTuition. They just need to be smart shoppers.
"Things are different this year," he says. "Consolidating can still be a great way to make loans more manageable. You're just going to have to read the fine print really carefully."
New York Attorney General Andrew Cuomo's investigation into shady deals between lenders and universities has led to multimillion-dollar settlements nationwide. Last week, his office subpoenaed 90 college alumni associations to determine if the schools accepted undisclosed gifts in exchange for steering graduates toward consolidating their loans with "preferred lenders."
But savvy borrowers who hunt for the best deals have little to worry about, says Mark Kantrowitz, founder of student loan advice site FinAid.org. The scandal is about conflicts of interest, not unfair lending.
Careful consumers are in a great position to find deals, says Mr. Kantrowitz. That's because last year Congress axed the "single holder" rule. The decades-old law forced students who borrowed from only one lender to stick with that lender if they wanted to consolidate. Now borrowers are free to consolidate with whoever offers the best plan, Kantrowitz says.
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