topic Re: Obama's Special Direct Consolidation Program in Student Loans

Obama's Special Direct Consolidation Program

iherjan — Tue, 10 Apr 2012 21:38:21 GMT

Any experience you could share on this topic? I qualified, applied - hoping I could consolidate the loans into one lump sum, which would result in fico score increase (there's a note in my score that indicates I have too many installment (read-student) loans which is hurting my score), interest rate reduction and lower monthly payments. Approx. 2 weeks later I recieved a call from Sallie Mae's rep. asking why I chose to apply for it. When I explained my reasons, they said:

1. Even after consolidation, each loan will still appear individually on my credit report

2. The 0.5% interest rate reduction is no deal compared to the 1% interest rate reduction benefit Sallie Mae offers after 24 consecutive payments minus another 0.25% for automatic debit payments.

3. My loans would be transferred directly to the department of education (I'm not sure if that matters to me)

4. I may lose some of the priveleges my loans may be currently eligible once I consolidate.

Percentages spoke for themselves, so I withdrew my application for Special Direct Loan Consolidation and decided to stick with Sallie.

But I am curious to hear your stories. I tried researching the benefits of this "special" program, but to be quite honest - the only thing I'm finding is the governments website which tells you alot about how to apply and what happens after you do and who qualifies and bla bla bla. But no clear statements about the actual financial benefits (aside from the 0.5% percentage reduction). If this is the only benefit, than choosing Special Direct Loan Consolidation offers much less than other private lenders such as Sallie. What's the point? Did Obama administration just want to get rid of the FFELP loans altogether and hope people wouldn't do their math?

I'd recommend any opinions on this topic, because I'm somewhat confused.

Re: Obama's Special Direct Consolidation Program

llecs — Tue, 10 Apr 2012 23:26:40 GMT

I don't know the specifics of the loan, but on a FICO standpoint, there might not be a gain. On the contrary, your FICO score would likely drop as the new loan is added, though that drop will fade away within a year or so. The old loans will still report and a new one will be added. And that's a good thing the old loans will still report because of their age. They'll continue to report and age well for the next 10 years. So, on a FICO standpoint, don't do it. But if there are other benefits like rate reduction or having less payments to worry about, then I'd consider it.

Re: Obama's Special Direct Consolidation Program

drkaje — Wed, 11 Apr 2012 01:55:52 GMT

Life is bigger than FICO scores. I wouldn't have any problems transferring away from Sallie Mae if (after research) it made numerical sense.

Re: Obama's Special Direct Consolidation Program

acediggit50 — Wed, 11 Apr 2012 19:14:39 GMT

how do i apply for this program

Re: Obama's Special Direct Consolidation Program

SyntheticMemories — Thu, 12 Apr 2012 01:19:33 GMT

If you qualify you would have gotten an e-mail.

After talking to them about it I opted for the regular consolidation. I wanted them all as one loan and I needed the Income based repayment system and the Public Service Loan Forgivness Program...made more sense finicialy for me to go with the regular direct consolidation.

Re: Obama's Special Direct Consolidation Program

thankfulheart — Mon, 16 Apr 2012 02:47:07 GMT

I withdrew my regular consolidation and went with the special. I already had several loans with DirectLoans and, yes, they each report as a separate tradeline, dangit, BUT, having them all under one "roof" makes it much easier for the payment end of things. IBR applies to the lot and I only have to make one payment. The math didn't fall in my favor one way or the other, particularly, except maybe the .5% bit. I'm shuddering at what adding the final loan to the consolidation is going to do to my scores as I'm in the hunt for a mortgage, but my lender told me it was a must-do to qualify, so it is what it is. It's been about 30 days, so I'm anxious to have it settled to see the results.

Re: Obama's Special Direct Consolidation Program

lolabelle — Mon, 16 Apr 2012 17:29:16 GMT

iherjan wrote:

Percentages spoke for themselves, so I withdrew my application for Special Direct Loan Consolidation and decided to stick with Sallie.
But I am curious to hear your stories. I tried researching the benefits of this "special" program, but to be quite honest - the only thing I'm finding is the governments website which tells you alot about how to apply and what happens after you do and who qualifies and bla bla bla. But no clear statements about the actual financial benefits (aside from the 0.5% percentage reduction). If this is the only benefit, than choosing Special Direct Loan Consolidation offers much less than other private lenders such as Sallie. What's the point? Did Obama administration just want to get rid of the FFELP loans altogether and hope people wouldn't do their math?
I'd recommend any opinions on this topic, because I'm somewhat confused.

I'd guess there's a benefit where private lenders are difficult to deal with and perhaps don't offer the same benefits that the federal government does.

But, honestly, I don't see that there's a huge benefit. You know what would really help? Allowing consolidation into a federal program for private loans (I mean private private, not privately-held federal loans). It would probably be a lot more helpful to the average Joe than bailing out another bank...

Re: Obama's Special Direct Consolidation Program

GST2008 — Sun, 22 Apr 2012 18:10:27 GMT

I did the Direct Loan Consolidation about 3 months ago. I am also making the Income Based payments and working towards the Public Service Loan Forgiveness now. The consolidation didn't affect my credit scores at all. If anything, it will be helping them as the Income Based payment is massively less than I would have been paying each month, freeing up more money for me to pay down balances on my CCs. At the 30 year rate, I would have been paying about $1,000/month on the loans, I am presently paying $94.00/month. That rate seemed very low to me, but I'll take it :)

Re: Obama's Special Direct Consolidation Program

Student_Loans_Kill — Sun, 22 Apr 2012 19:51:40 GMT

llecs wrote:
I don't know the specifics of the loan, but on a FICO standpoint, there might not be a gain. On the contrary, your FICO score would likely drop as the new loan is added, though that drop will fade away within a year or so. The old loans will still report and a new one will be added. And that's a good thing the old loans will still report because of their age. They'll continue to report and age well for the next 10 years. So, on a FICO standpoint, don't do it. But if there are other benefits like rate reduction or having less payments to worry about, then I'd consider it.

Horrible advise. There are many benefits to a consolidation, any person coming out of a professional program in school with a professional degree will tell you about all the loan counseling that takes place with an exit interview. Obama's consolidation is better than what was originally there. I can tell you first hand my score didn't drop from consolidation but rather increased.... My first years payments a whopping Zero because it's based on my residency income, and next years the same, I won't see significant student loan payments until 2 years into my first job

Re: Obama's Special Direct Consolidation Program

MarineVietVet — Sun, 22 Apr 2012 20:22:36 GMT

Student_Loans_Kill wrote:

Horrible advise.

I must say I've seen much friendlier and more respectful disagreement with another opinion.

Re: Obama's Special Direct Consolidation Program

Student_Loans_Kill — Sun, 22 Apr 2012 20:40:43 GMT

MarineVietVet wrote:
Student_Loans_Kill wrote:

Horrible advise.
I must say I've seen much friendlier and more respectful disagreement with another opinion.

Telling someone NOT to consolidate a series of student loans based on FICO theory mathematics is bad advise at best. Furthermore , as an observation providing input to the OP with useful personal experience is what I would want if I posted the same question. Which is what I suggested. Many trade lines consolidated into one department of education loan made my FICO increase. Signed...VA surgeon

Re: Obama's Special Direct Consolidation Program

MarineVietVet — Sun, 22 Apr 2012 21:47:23 GMT

Student_Loans_Kill wrote:

Telling someone NOT to consolidate a series of student loans based on FICO theory mathematics is bad advise at best. Furthermore , as an observation providing input to the OP with useful personal experience is what I would want if I posted the same question. Which is what I suggested. Many trade lines consolidated into one department of education loan made my FICO increase. Signed...VA surgeon

Isn't what you just typed much more respectful? That was my only point.

Even if we truly think someone else's opinion could not be more incorrect we can voice our disagreement in the right way. I don't know what is wrong with prefacing a comment with "I must respectfully disagree with you".

Re: Obama's Special Direct Consolidation Program

frogfan12 — Tue, 24 Apr 2012 12:11:35 GMT

In some instances, waiting 24 months with Sallie Mae would be a better deal. Now I'm in grad school and my loans are deferred. So now I'm ineligible for the SM 24 month lowered interest rate. For me, consolidation just doesn't make a whole lot of sense right now because my interest rate (i.e. payments) would not drop very much. Obama could have worked on that part a bit more. Just my two cents.

Re: Obama's Special Direct Consolidation Program

loviedovie — Sat, 05 Jan 2013 16:45:38 GMT

thankfulheart wrote:
I withdrew my regular consolidation and went with the special. I already had several loans with DirectLoans and, yes, they each report as a separate tradeline, dangit, BUT, having them all under one "roof" makes it much easier for the payment end of things. IBR applies to the lot and I only have to make one payment. The math didn't fall in my favor one way or the other, particularly, except maybe the .5% bit. I'm shuddering at what adding the final loan to the consolidation is going to do to my scores as I'm in the hunt for a mortgage, but my lender told me it was a must-do to qualify, so it is what it is. It's been about 30 days, so I'm anxious to have it settled to see the results.

I would love to keep this thread alive and find out how the Loan Consolidation impacted people's scores for better or worse.

Thankfulheart are you still on the forums?

I graduate from my program in May and will be entering the Public Service Loan Forgiveness Program at that time.

I would love to hear any advice you have on the topic. Anyone else too.