GAO Report: Federal Website for Private Student Loans May Be Unneeded

A report issued on September 29 by the Government Accountability Office has concluded that a Congressionally ordered federal Web-based tool to help college students compare terms and lenders for federal and private student loans may be a significant challenge to implement and could be entirely unnecessary.

The 36-page GAO report says the tool, which is mandated by the Higher Education Opportunity Act (HEOA) of 2008, is no longer needed for federal student loan comparisons because all federal college loans are now issued directly by the Department of Education through the Federal Direct Loan program.

Student loan legislation contained within the Obama administration’s health care reform package that passed through Congress in March eliminated the third-party federal student loan program that had previously allowed private lenders to issue federal education loans on behalf of the government. With no private lenders originating federal student loans, there are no longer multiple lenders or multiple borrower incentives (like rate and fee discounts) for students to compare.

As for comparisons of non-federal private student loans, the GAO notes that prospective borrowers who seek private student loans may already have sufficient information readily available to them, both through their schools’ financial aid offices and through individual lenders’ websites.

Private Student Loans Take Back Seat to Federal Student Loans

Providing a private student loan search and comparison tool may also conflict with the Department of Education’s longtime financial aid message, as well as its re-aligned mission of being the primary provider of federal student loans.

The Department of Education has made a practice of encouraging families to take advantage of all available federal financial aid — grants, work-study, and low-cost government parent and student loans — before turning to costlier private student loans. Placing a tool for finding and comparing private student loans on the Education Department’s website, the GAO points out, could lead some students or parents to mistakenly believe that the department is endorsing the use of private student loans alongside federal financial aid, even before a student’s federally guaranteed financial aid dollars are exhausted.

Furthermore, as the Education Department’s “federal financial aid first” message has gained traction and as fewer recession-stung borrowers have been able to qualify for credit-based private student loans, the use of private student loans has declined, further diminishing, the GAO argues, the need for the private loan comparison site.

According to GAO figures, private student loan lending decreased to about  billion in 2008–09, a drop of 50 percent from the volume of private student loans originated in 2007–08.

Online Comparison of Private Student Loans Faces Roadblocks in Practicality

Providing useful data on private student loans would require the Department of Education to secure the cooperation of a large number of banks and private lenders. Each lender has its own lending guidelines for its private education loan program, and almost all lenders regard their underwriting criteria as proprietary information.

A lender’s underwriting guidelines determine not only what kind of income and credit profile is required to qualify for the lender’s private student loan program, but what rates and fees an eligible borrower will qualify for: Borrowers with weaker credit will generally pay higher rates and fees than borrowers with very good credit.

Without having access to lenders’ closely guarded underwriting guidelines, the Department of Education would likely not be able to create a loan tool that would supply the intended proper guidance to prospective borrowers to help them determine which private student loans would be available to them or which private student loan programs would offer them the best rates.

Additionally, since the HEOA-mandated student loan tool requires the Department of Education to provide real-time information on student loan interest rates, availability, repayment options, and lending oversight, the department would need to expend significant resources to continually verify and update the accuracy of its private education lender data in order to avoid the appearance of bias against or endorsement of any particular lender.

This need for resources points to another significant challenge identified by the GAO: minimizing the cost of the student loan tool to the federal government. The tool would, in the GAO’s assessment, “require a considerable investment.” The Department of Education has already determined that such a tool should not be developed or funded by private student loan lenders, but the department itself is unwilling to guarantee that it can provide a stable funding source to meet the HEOA mandate.

Website Comparing Private Student Loans Would Be Redundant

As of February, under another provision of the HEOA, lenders that offer private student loans must provide borrowers with additional disclosures regarding the overall cost of a private student loan and the student’s eligibility for federal financial aid. The GAO maintains that these new required disclosures further reduce the need for the mandated student loan tool.

While GAO research indicates that students may find a government-sponsored student loan comparison site to be more factual and neutral than one run by lenders, several lenders and higher education associations questioned whether the federal comparison tool would simply duplicate existing resources and information already made available online by various student loan lenders and consumer advocacy groups.

Moreover, education officials note, most students turn primarily to their school to obtain information about financial aid and college loans. By supporting the ability of colleges and universities to provide accurate student loan information, the Department of Education may better be able to reach the target population than by creating its own student loan comparison website.

Modification of the student loan tool mandate, however, would require Congressional approval. To date, members of Congress have not indicated they are willing to alter the terms of the HEOA.

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Lowest Student Loan Consolidation – Consolidate Your Student Loan To Acquire The Most effective Deal

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Question by Gregory: What is a good loan consolidation program for Federal and Private student loans?
I am looking for a good student loan consolidation program that will take on both my Federal and Private student loans from Sallie Mae. If you know of any good ones that you have heard of or used in the past, please leave a description or website so I can look into it. If you are a loan company, don’t bother answering the question as I will mark it as Spam. Thanks.

Best answer:

Answer by stressedandconfused
I used direct loan consolidation. It took about 2 months.

http://www.loanconsolidation.ed.gov/

Add your own answer in the comments!
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Consolidate Federal Student Loans – Make Your Student Loans More Manageable

When you consolidate federal student loans, you replace all of your existing federal student loans with one easy to manage loan. Why would you want to do this? Here are four reasons why you will want to consolidate your federal student loans.

If you have several federal student loans, each loan requires you to make monthly payments that, when added up, can be a heavy monthly burden. By consolidating your federal student loans into one loan, your monthly payment will be much less. That makes your debt much more manageable at a time when you probably need your money the most.

Also, by lumping all of your federal student loans into one loan, you simplify the repayment process. It’s much easier keeping track of one monthly payment with one lender instead of keeping track of multiple loans with multiple lenders, all with different due dates.

Another benefit of consolidating is you can get a lower interest rate. This helps offset the cost of lowering your monthly payments and extending your loan. A lower interest rate over that extended period of time can add up to significant savings.

When you consolidate federal student loans, the consolidation loan pays off your outstanding federal student loans. So by consolidating, you have paid off several loans at one time – either on time or early. That improves your credit score.

Why is that important? If you decide to get a mortgage, a car loan or any other type of loan for that matter, you will receive a lower interest rate. And that saves you money.
In the case of a mortgage, it can save you thousands (or tens of thousands) of dollars.

When you apply for a mortgage, lenders look at your current monthly debt payment and compare it to your income. If your student loan payments are greater than 8% of your income, you may not be eligible for a mortgage. By consolidating your federal student loans, you can reduce your monthly payments so that you meet the 8% (or less) criterion and get that mortgage you’re after.

When you consolidate federal student loans, you lower your monthly payments, make life easier by dealing with only one loan instead of several, get a lower interest rate and improve your credit score. All of these benefits to you make this financial step a very smart one.

New Tools Help Families Find Private Student Loans, Estimate Financial Aid

Determining the cost of attending college is about to get easier. Thanks in part to federal legislation passed in 2008, students will soon have access to a new set of online tools that can help them determine how well they can afford the college of their choice. Additionally, these tools can help students calculate their estimated financial aid package, the cost of their student loans, the need for private student loans, and where to find private student loan providers.

Helping Students Shop for the Best Private Student Loans

Colleges in 12 states have joined forces with Overture Technologies to create an online search tool for locating private student loans. Private colleges in Alabama, California, Indiana, Kentucky, Maryland, Michigan, Mississippi, New York, Ohio, Oregon, Pennsylvania, and Tennessee developed the Student Loan Marketplace website as a way to help students locate college loans and compare student loan costs without having to submit multiple loan applications that may lower their credit score.

When students apply for multiple private student loans as they comparison shop for the best student loan deal, each loan application is a “ding” on their credit report, since each application is counted as a credit inquiry in response to the student’s request to receive credit. Multiple requests to receive credit within a short timeframe could substantially drop a student’s credit score in the immediate term.

Currently, the Student Loan Marketplace works with about 10 student loan companies that issue private student loans. In addition, the site provides more general information on student loans, including the federal student loan application process, lists of resources that provide national student loan data, links to the College Board, links to the Department of Education, and links to student loan information and advocacy projects.

Estimating Financial Aid to Calculate the Cost of College

The College Board is also getting into the act with its recently announced new tool called the Net Price Calculator. Like the Student Loan Marketplace, the goal of the Net Price Calculator is to make the cost of college loans more transparent to students and their families. The Net Price Calculator makes quick calculations that estimate a family’s eligibility for federal financial aid — federal student loans and grants — and assesses the need for other financial resources like scholarships, savings, and private student loans before a student applies for admission to a particular institution.

By enabling students to compare the overall cost of college and see how government grants and student loans are likely to be awarded, the College Board is opening the door for students and their families to make more informed decisions about which colleges and universities they can afford, given their unique financial situations. Families can also better assess the need for supplemental financial assistance like scholarships and private student loans.

The Net Price Calculator is an online tool hosted by the College Board but can be integrated into the websites of participating colleges and universities. Currently, about 20 pilot institutions are testing the calculator and providing final feedback. The College Board expects its Net Price Calculator to be fully available to interested schools by October, ahead of the 2011–12 application period for student loans and financial aid.

The Net Price Calculator requires the student to enter some family financial data, which is kept confidential. The system then makes calculations based on the College Board’s Institutional Need Analysis System, a standard measure for estimating financial aid. The tool also takes into account financial aid award practices that are unique to each participating school. Institutions that subscribe to the service can also customize the calculator to offer custom messages and additional information about school programs, campus tours, and application requirements.

The Net Price Calculator was developed in part to meet the requirements of the Higher Education Opportunity Act (HEOA) of 2008, which requires colleges and universities to provide prospective applicants with tools that combine actual institutional costs with student and family financial data to estimate the “true” cost of attendance. Higher education institutions are required to comply with the provisions of the HEOA by October 29, 2011.

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Student Loan Consolidation Can Help

Today’s career minded students can get help with the burden of having several student loans. One can focus on their chosen career, instead of losing sleep over paying several monthly student loan payments. Student loan consolidation can be the solution with several advantages.

How Student Loan Consolidation Works

Here is typically how a student consolidation loan works. When a student first applied for several loans from several different agencies and student loan providers, they each gave a different interest rate and term for paying back the loans. The idea of student loan consolidation, is to take all the different student loans and put them into one easy convenient loan. You them only have to make one monthly loan payment every month, instead of several loan payments every month over time. This saves the student both time and money. Having a lower interest rate and less checks to write every month are a couple of advantages of doing a student loan consolidation.

5 Helpful Benefits of Student Loan Consolidation

1. Lower Monthly Payments. Depending on your student loan situation and the type of lender you choose, you may be able to lower your monthly payments by up to 50%

2. Having Simple Loan Payments. By consolidating your student loans, you only have one loan payment per month and one check to write. This is very beneficial if you are writing several checks every month to multiple lenders.

3. Having Fixed Interest Rates. With some federal consolidation loans you can have a fixed rate for the life of your student loan. It’s best to do research to see what the best interest rates and term you are eligible for. You can check online to calculate the interest rate on a new student consolidation loan based on the rates of your current student loans. You can then round up to the nearest 1/8th of a percent of the weighted average of the interest rates on your eligible student loans.

4. Extending Your Payment Period. You may have a lot of student loan debt. With federal consolidation loans you may be able to extend the payment term up to 30 years. It’s a good idea to realize you will end up paying more interest over the life of your student loan consolidation. The idea is to get some leverage until your career takes off. You can focus on making money instead of several monthly loan payments.

5. In School Consolidation Programs. While still in school, eligible students can lock in a low rate. This would put you into repayment status, but since you are still in school, you are automatically put into deferment. The drawback of consolidating your loans while in school, is that you lose your 6 month grace period. The solution to this would be to request forbearance for up to 1 year on your student loan consolidation. Here again you can do some research and get more information online.

Student Loan Consolidation Help Online

With today’s Internet technology, you can get a student loan consolidation quickly and easily. The Internet makes research and finding great programs, easy as a few clicks of the mouse. You can learn everything you need to know from information sites that provide the latest news and data in regards to student loan consolidation. With just a few clicks of the mouse, you now can get loan quotes and compare loan companies without having to run all over town.

Student Loan Consolidation Helps Relieve Stress

Student loan consolidation can help student loan borrowers focus on their education, instead of debt. With a single new loan and lower monthly payments, you can focus on what’s most important, education and your new career. There is no need to lose sleep stressing out about how you’re going to pay back all those student loans. There are several agencies and companies online that can help with many resources and information to get the help you need.

Question by Gregory: What is a good loan consolidation program for Federal and Private student loans?
I am looking for a good student loan consolidation program that will take on both my Federal and Private student loans from Sallie Mae. If you know of any good ones that you have heard of or used in the past, please leave a description or website so I can look into it. If you are a loan company, don’t bother answering the question as I will mark it as Spam. Thanks.

Best answer:

Answer by stressedandconfused
I used direct loan consolidation. It took about 2 months.

http://www.loanconsolidation.ed.gov/

What do you think? Answer below!