The most recent “Dear Colleague” letter stated: “the consolidating lender is responsible for ensuring that they follow program guidelines in consolidating loans.” Unfortunately, that’s easier said than done. We’ve been hearing from students that some lenders are not following the rules: some are consolidating loans that are not to be included per the promissory note that the student signed, some are also consolidating a single consolidation loan. The worst offenders are those lenders consolidating loans for students who don’t realize that they signed a consolidation application promissory note with another lender.
What does this mean for students?
We expect that:
- Students who secured 2.875% or 4.875% consolidation loans while in-school will have those loans re-consolidated into new loans resulting in a loss of those low rate loans
- Consolidation marketers will approach students who have consolidated with T.H.E. and convince them to sign a new consolidation promissory note. Their T.H.E. loans will be paid off and moved to some operation that does not provide real and reliable repayment benefits.
When we contact students to notify them that their T.H.E. loans are being consolidated away, most of them are shocked, saying they had no intention of leaving. So, what can we do?
Educate, educate, educate.
We can’t stress enough the importance of educating all students about how to manage their loan portfolio. Preparing for repayment and creating a manageable repayment strategy should not be taken lightly. Would you encourage anyone to sign a mortgage over the phone? Buy a car without a test drive? Education is essential to keep your students safe from the pitfalls of direct-to-consumer marketing, especially when it comes to consolidation. With today’s relatively high variable interest rates and the introduction of fixed rate loans, there are only two reasons your students should consider consolidating:
- To get a real, reliable, and deliverable incentive, like the T.H.E. Bonus. More than 95% of T.H.E. borrowers receive our monthly bonus, because we don’t require perfection.
- To simplify repayment by having one point of contact.
Let us help you reach your students.
If you haven’t already, please take the time to call your key contact at T.H.E. and schedule one of our corporate presenters to talk to your students, face to face, about consolidation. We’re also working on a letter to students to help them understand why they need to be so careful about the marketing they respond to. Educate today, to make sure your students can identify deceptive marketing, make smart decisions about their loans, and get through repayment without costly mistakes.