Your Questions About Direct Loan Servicing

Nagesh answers:

You can call Direct Loans to consolidate your loan out of default. They are the company that the US dept of Education contracts out since 1994 to service their federal student loans. They can consolidate your loan for you and offer you several different repayment plans, deferments or forbearances.

Their ph # 1-800-848-0979

Nagesh answers:

Student loans at the federal level are need, not grade, based. You only have to be registered with the academic institution (Full or Part-time{the amount you get is based on that, and your level of need}). Registration is dependent on grades and that is up to your school, so if they have accepted you back, and you are then registered with them, you can receive Fin. Aid. Call the Financial Aid Office at your school, and ask them if, as long as you are registered as a student (tell them you were on academic probation and took a break to sort out some personal issues), you are still eligible. I am almost 90% sure they will tell you you are eligible. (They can’t accept you and tell you you can’t have access to a government aid program to pay for it). You can file for Fin. Aid at the FAFSA website (make sure it is the official one…a couple are out there that are not), and then you will find out anyway, once you register. It is up to the school to determine whether you should be there or not, not the Feds. They are concerned with how much you should get once you are registered.

This is from the .gov website (Note that it still tells you to contact your school, so do that):

Who is eligible to receive Federal Student Aid?

To receive federal student aid, you must meet certain requirements. You must:
Be a U.S. Citizen or eligible noncitizen.
Have a valid Social Security Number (unless you’re from the Republic of the Marshall Islands, the Federated States of Micronesia, or the Republic of Palau).
Be registered with Selective Service if you are male and 18 to 25 years of age (go to www.sss.gov for more information).
Have a high school diploma or a General Education Development (GED) Certificate or pass an exam approved by the U.S. Department of Education.
Be enrolled or accepted for enrollment as a regular student working toward a degree or certificate in an eligible program at a school that participates in the federal student aid programs.
Not have a drug conviction for an offense that occurred while you were receiving federal student aid (such as grants, loans, or work-study).
Also:
You must not owe a refund on a federal grant or be in default on a federal student loan.
You must demonstrate financial need (except for unsubsidized Stafford Loans).
Other requirements may apply. Contact your school’s financial aid office for more information.

Nagesh answers:

A few years ago, there were two systems for federal student loans: Direct loans, where the lender was the federal government itself, and FFEL loans, where the lender was a private company such as SallieMae or a bank, and the loan was just guaranteed by the federal government. At one point (around 2009, I believe) the FFEL loan program was discontinued, and any loans under that system were transferred to the Direct loan program. So, if your loans are from before that period, that may be what occurred.

If your loans were issued after that, they are Direct Loans. They haven’t been sold, but the servicer of the loan may have changed. With these loans, the lender is still the federal government, but the feds don’t do their own customer service. They assign each loan to a private company like Sallie Mae or Nelnet or Great Lakes, and that’s who services the loan. There were originally only a few of these servicers, but since the student loan program has grown over the past few years, more servicers have been added, so it’s not uncommon for a loan to be reassigned to a new servicer. Because students continue to make payments while the transition is going on, sometimes records go astray and don’t get transferred properly to the new servicer.

You need to work with the current servicer of the loan first. You can find out who that is by going to NSLDS, the National Student Loan Data System at www.nslds.ed.gov This where your student loan records are kept. You can access it by using your FAFSA pin # (if you’ve forgotten what it is, go to pin.ed.gov and request a duplicate). Click on the loan and you will be able to see who the servicer is and how to contact them. Then gather any records of the payments you made, including who you sent the payment to, and talk over the situation with the new servicer. It may take awhile to get it straightened out, but you should eventually be able to have your credit record cleared. In the meantime, you can contact the credit reporting agencies and tell them you are disputing the record and would like to place comments about the situation in the file. They may also be able to assist with tracing your payment record. The 3 big agencies are Equifax, TransUnion and Experian.

Nagesh answers:

ING Direct is a direct lender. Lending Tree is a mortgage service where you enter all your personal information on their website and then you will receive offers from various Mortgage Companies and Banks so that you can compare and choose. The fee for their service was $500 in my case, but the cost was added to the loan and it saved me an incredible amount of time. You are not obligated at all to use their service. Make sure you receive a “Good Faith Estimate” from every lender so that you can compare all charges fees and terms properly.

Nagesh answers:

Definitely keep your federal loans separate from your private loans. A Federal Consolidation Loan can only be comprised of *federal* loans, so if you get a letter from a company offering to consolidate private + federal, don’t take the bait! You could end up with a Private Consolidation Loan with lousy terms and none of the security of the Federal Consolidation Loan program.

Indeed, students of all sorts (including students who haven’t even graduated) are getting tons of fliers about consolidation. Some are from legitimate companies and some, unfortunately, are not. When picking a consolidation lender, it’s good to pay attention to the interest rate offered — but this, by far, is not the only indication of a good lender. In fact, some of the companies offering rock-bottom rates are the questionable ones that you want to avoid! Instead, ask yourself the following:

* How long has the company been in business? This is a good indication of the longevity of the corporation. Student loan companies come and go and, when they go, they have to sell your loans to someone. If this occurs, you won’t get a say in the matter and could end up with a less-than-ideal lender. In some cases, when these sales are made, students aren’t properly notified of the sale, which has led to some students missing payments… Which can, in turn, lead to delinquency and default.

* What is the company’s website like? Not only is a strong, detailed website a sign of a good lender, but it can also be critical in helping you keep track of your due dates, look up information during tax season, and apply for deferments. This is also a good way to spot a “scam”-type company. If you log onto the website and the first thing you see if an application form asking for your social security number, RUN. A good company will give you ample opportunity to learn about the terms and conditions of their loan before you apply.

*What is the lender’s reputation? What’s their customer service center like? Now, to be fair, now may not be the best time to call up each company to gauge their customer service. During the last week in June, all of those companies will be swamped with calls from borrowers consolidating last minute. If you have a chance, talk to your friends, family, and financial aid office to see who they recommend.

For federal consolidation, Sallie Mae and Citibank are the #1 and #2 consolidation lenders (respectively) in existence right now — and for good reason. Their loan processes are streamlined, the websites give you everything you need to manage your loans from disbursement to repayment, and they are leaders in their industry. I would highly recommend consolidating with either of these comapnies. In fact, I won’t name anyone else because I don’t think the others hold a candle to these two. But if you’re curious what’s out there, you can check out FinAid.org’s list of the largest consolidation lenders: http://www.finaid.org/loans/biglenders.phtml

Sallie Mae also offers private consolidation, so you could direct all your private loan volume their way, too, and they might be able to bill you on a single bill for all your loans. Although I generally recommend Sallie Mae above the others, I acknowledge that, unlike with Federal consolidation, private consolidation interest rates will vary — so it might be worth shopping around. Other lenders who offer private consolidation include…
Key Bank: http://www.key.com/html/H-1.39.b.html
Education Finance Partners: http://www.educationfinancepartners.com/loans_privateconsolidationloan.html
Nelnet: http://www.consolidation.nelnet.net/PvtDescription.asp
NextStudent: http://www.nextstudent.com/private-consolidation-loans/private-consolidation.asp
SunTrust: http://www.suntrusteducation.com/debtcons/privcons.asp
Wells Fargo: https://www.wellsfargo.com/student/loans/repayment/consolidation/consolidator.jhtml

Finally, if your loan volume is feeling a little hefty, here’s a little tip: the Federal Consolidation Application has two loan sections: the first section will ask you what loans you want to consolidate. Simple, right? Just put down all the loans you want to include in that particular consolidation. The *second* section will ask you what loans you *don’t* want to consolidate. While this might seem like an odd question, use this section to list any other student loans that you owe, including your private loans. Why is this important? Well, as you may know, Consolidation Loan repayment terms can vary anywhere from 10 years to 30 years. Your lender will determine *your* repayment period based on how much student loan debt you owe in total. If you tell them about your private loans, they will take them into account and will likely give you longer to pay off your federal loans. Longer repayment period = lower monthly payment.