Take Advantage of Consolidation Incentives

Are there Any Discounts Left to Find?

In the past, student loan providers competed vigorously with one another, to attract borrowers to consolidation loans, often with promises of cash-back bonuses and deep interest discounts. Drastic changes in the student lending industry have since driven such practices away. For lenders, some of the incentives for consolidation are gone, so many have now, in fact, suspended their consolidation loan services.

Federal Stafford Loans were once administered in partnerships between the United States Government and individual private lenders.  Today, federally-backed loans are issued by the William D. Ford Federal Direct Loan Program, which no longer requires the services of banks and credit unions.  Instead, The Department of Education acts as its own lender, fulfilling loans without the private-lender middleman.  As a result, some banks and credit unions no longer carry student loans that are appropriate for consolidation.

Shopping for Incentives and Perks

Incentives and perks, used in the past, were designed to lure students into consolidation deals that brought multiple loans under a single repayment umbrella.  For lenders, the additional borrowed funds being drawn into their in-house loan products provided increased revenue.  Since the game changed, as a result of the Health Care and Education Reconciliation Act of 2010, banks are less active in the government-sanctioned student assistance process, so opportunities for them to make money are less abundant.

Competition among big student loan providers is here to stay, but with less fanfare.  Bonuses and cash incentives initiated by private lenders are not as prominent as they once were, reducing consolidation savings for students who re-work their student debt.

“Show Me the Money”

Lenders occasionally run limited cash giveaways for borrowers, but these are not as plentiful as they once were.  Savings for some private borrowers is limited to lowered interest rates and other incentives offered for entering into automated payment agreements and electronic withdrawal banking terms.  Sallie Mae still operates a cold, hard cash program that might benefit you:

• Student borrowers affiliated with Sallie Mae are eligible to sign up for the Great Sallie Mae Giveaway, a monthly cash prize worth as much as $25,000 that goes toward repaying Sallie Mae Loans for winners -  including consolidation loans where appropriate.

Federal Repayment Opportunities

Government loans qualify for Federal Consolidation, which often leads to lower payments for student borrowers.  The loans also provide extended repayment options, which help graduates manage debt during personal economic difficulties.  Consolidation also helps student-borrowers avoid default, which has long-term credit implications.

Additional resources from the Federal Government include several structured repayment plans that match payments with each borrower’s ability to pay.  Income-based plans require borrowers to repay a certain percentage of disposable income, keeping them on-track with repayment, while accommodating limited earnings.  Graduated plans are also available that start-out with low payments, which are adjusted upwards as repayment progresses.  The incremental growth in payment size allows graduates to keep pace with repayment following school, when earning power is limited, and then catch-up with larger payments as careers become more established, and incomes rise.