End of Rehab - Consolidation App??

[apandabear]

So I'm in the last month of rehab, and last night Allied Interstate (CA) calls me to let me know I'm almost done. YAY! They need one more thing from me so they can get my loan sold to a lender.

They want me to fill out a loan consolidation application. Why?

There was only one loan. Naturally, they've tacked on about $7k worth of fees, which they are trying to roll into the loan amount on the consolidation app. 

It doesn't seem right, and I wanted to know if this (consolidation app) is standard practice for coming out of rehab and getting your loans bought back by a lender??

Thanks!

ETA: My loans were with Sallie Mae originally. The consolidation app says Direct Loans. hmm...

[Anonymous]

So they're wanting to change a private loan into a public loan, essentially? Or are they just co-opting the forms used by DL?

So weird.

[apandabear]

My loan is federal loan. I've never had private loans. Sorry I wasn't more clear.

Summary:

I had several federal loans w/Sallie Mae.

Consolidated into ONE loan in 2006 or 2007 (still Sallie Mae).

Stopped paying in 2009ish. Defaulted in 2010ish.

Turned over to USA Funds.

Being collected by Allied Interstate.

Last month of rehab, being asked to fill out a consolidation application.

Main concerns/questions:

Will this app result in INQs on my report?

Will I get the full benefits of rehab?

Isn't the cap on fees 18.5%?? They've tacked on 33%.

I'm assuming the form is to shop my loan to Direct Loans? I guess (from scouring the internet) that lenders just aren't buying rehabbed loans, and consolidation is the way to get around that?

I'm just a little freaked out! I don't trust CAs, especially those associated with Sallie Mae. I have yet to personally have a problem with them, but it's not like I would trust anything a phone rep making $10/hour has to say about it... 

Anyone have this happen before?

[scotth1424]

I filled out the application before my ninth payment and sent it back to Allied Interstate.  But since then i got a letter stating that Sallie Mae has picked my loan back up and like i have mentioned before i have 112 payments of $165.  Well today i called Sallie Mae to set up payments to automatically be debited and they informed me to contact Direct Loans.  I called Direct Loans and the have received the application for consolidation but they also said i have the option to cancel it before its processed.  So now with this information i called Sallie Mae back and they said i could repay my loans through them.  Now I am not sure what to do.

[apandabear]

Wow that is way too confusing.

So you have the choice... Sallie Mae or Direct Loans?

It seems like Direct Loans would result in an INQ and a new TL. Not sure what would happen if you went back to SM.

Crazy. 

As much as I hate SM, I would much rather have my TLs go back to them, to avoid all this mess. I don't know if by consolidating I lose the chance to reduce those fees to 18.5% either. So confused.

[scotth1424]

Well in the Consolidation App it says i was requesting to consolidate two loans in the amount of $7,360.09 and $8,399.47 because they've added that 18.5%.  When i got my letter from Sallie Mae it is saying my outstanding principal is $6,917.85 and $7,164.78 but im looking at paying 3,632.97 in interest over the nine year nine months.  Which would be Estimated total of $18.560.64  This is where im confused, should i just go with the consolidated loan or stick with sallie mae?

[apandabear]

Okay, that makes a bit of sense, seems like the fees got dropped.

Check out the National Student Loan Database nsld.ed.gov to check the amount of principal and accrued interest you have on your loans. You need a PIN, though it's quick and easy to get.

In theory, the consolidated loan should drop your interest percentage. If you check out the Direct Loans website, there is an estimator. I tried a couple different things and it would drop by .25%. Not sure if that's worth it to you, but it could add up over the years.

I have absolutely zero intentions of paying the minimum for 10 years. I hope to pay off the total ~26k in 2 years. So interest rates don't mean much, I just want the best impact to my credit report and FICO score... meaning the smallest number of TLs and no INQs if possible.