Problems with consolidating student loans

Posted by / 09-May-2020 07:40

One reason is because of outstanding interest that is being capitalized. of Education is authorized to charge a fee of 18.5% that becomes part of your consolidation loan.Or if you are consolidating defaulted loans, the U. But if the balance seems way off, something may be wrong.But if you switched majors, transferred colleges, or went on to graduate school, you may be among the 19% that owe ,000 and above, or the 5.6% who owe more than 0,000.Chances are if you’re dealing with student loan debt, you’re not just dealing with one loan. And if you couldn’t cover the costs with federal loans, you very well may have turned to a private lender, such as a bank or other lending institution (e.g., Sallie Mae) to fund the rest of your expenses.

Absent an active bankruptcy, an outstanding judgment, or a wage garnishment order, a student loan borrower should be able to consolidate through the Direct consolidation loan program, as long as they have eligible federal loans.These are nightmare scenarios that are fixable, but if you don’t take steps to confirm that your loan holders were actually paid in full by the consolidation, you may be harmed by credit damage and additional fees and penalties. Borrowers who are in an active bankruptcy may not be able to consolidate – and even borrowers who have recently completed bankruptcy may encounter problems because there sometimes is a lag in reporting that the bankruptcy has ended.A prior court judgment on a federal student loan could impede consolidation as well, either by imposing additional requirements on the borrower (i.e., making payments before consolidating) or by preventing the consolidation from going through at all.Or the consolidation servicer may send the “check” to the wrong company.I’ve even seen situations where the consolidation servicer – leaving the borrower with a duplicate loan balance once the consolidation loan has been issued.

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Nevertheless, I have repeatedly seen loan servicers refuse to consolidate a borrower’s eligible federal student loans where none of these issues were present.

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