Newspaper article St Louis Post-Dispatch (MO)

Beware of the Red Tape in Student Loan Consolidations

Newspaper article St Louis Post-Dispatch (MO)

Beware of the Red Tape in Student Loan Consolidations

Article excerpt

Is the student-loan industry sabotaging the government's new student-loan consolidation program?

That's what I've heard from some readers who are seeking to enter the government's plan.

These readers are currently out of school and trying to lower the cost of their monthly loan repayments. They'd also like to consolidate their student loans, so they can pay with a single check.

They say the government offers better terms than private consolidators.

But their lenders have blocked them from switching to the federal plan, by failing to fill in the needed forms.

Take John McNeilly, 32, of Arlington, Va., who owes some $53,500. Due to unemployment and procrastination, he defaulted on some of those loans.

Now out of graduate school and working, he is seeking an affordable way of repaying what he owes.

The private programs, he says, want too much a month - in the $500 range. But under the government's new "income-contingent" program, repayments are linked to what you earn. McNeilly says he could pay as little as $337 a month.

Before he can switch to the government plan, the lenders and loan-guaranty groups that rhold his loans must tell the U.S. Education Department how much he owes.

All but one have done so. The holdout: the USA Group in Fishers, Ind., a persistent opponent of the federal program.

USA can make good money by hanging on to McNeilly's loan. Conversely, more money can be recovered for the taxpayers if McNeilly switches to the government plan.

USA Group spokesperson Bob Murray claims that McNeilly isn't eligible for federal loan consolidation. Before making the switch, he says, McNeilly must make three consecutive payments on his USA loan.

Not true, says Leo Kornfeld who runs the government program. The law specifically says the government can consolidate loans in default. Kornfeld is investigating the case. Murray says that USA is reviewing the issue.

Steven Fought, 41, also of Arlington, is fighting a different kind of battle with the Pennsylvania Higher Education Assistance Agency (PHEAA). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.