Student Loan Consolidation

[jiacinto]

Today I get my mail and find out that a company I've never dealt with is about to consolidate my loans. A few months ago, before I graduated from my MA program, I got a phone call from a company telling me to consolidate my loans.

Anyway I then researched other companies and basically all the rates were going to be the same. I have extensive Stafford Loan debt from college and graduate school and was able to get the lowest rates in history. I consolidated with this company and was able to get my rates locked in after the last fed cut.

Well today I get a letter from another company I've never heard of saying that I had agreed to consolidate with them. To my knowledge I never agreed to do it with them.

So now I have these questions:

1) How did this other company get my information?

2) Could they be basically servicing the loan of the first company I did with? Are they basically a company to which the bank I consolidated with hired to run the administrative aspects of my loan?

3) And if both companies are different then what should I do to figure out what happened?

I plan on calling the company who sent me the letter on Monday.

[northofdenali]

1. Loans are like mortgages - they get "sold"

to companies other than the original you took the loan through. On my last mortgage, I paid 3 different lenders over the period of 10 years. That's how your info gets out there, and is probably also the answer to your second question.

Try their toll-free number or website. Most of these companies are aboveboard, and will be happy to answer your questions.

Consolidation, in the long run, makes your loans easier - and cheaper - to pay. Just be sure you're making the highest payments you can afford, and double up (with one payment marked for principal only) when you can.

[lcordero]

2. Be careful

I haven't seen anything on the news yet but I really get the idea that these are "bait and switch" scams along with a twist of Identity theft to it.

[hedda_foil]

3. Call them and ask.

That's the first step. The second company probably bought the loan, as you guess, but you need to talk with both companies to make sure.

[jiacinto]

4. But see

The first company told me they would never sell the loan. So I am really concerned.

[Divernan]

6. What have you got in writing?

Anything the person who contacted you told you verbally, as on the phone, is not binding. Even anything they told you in writing, such as in advertising, will probably not be binding unless it was "memorialized" (included) in the new contract you signed to consolidate your loans. You will usually find boilerplate language in such contracts that only the terms in the contract are binding and any other statements or promises are not binding.

The contract will probably also include language providing them the right to transfer your obligations to another entity and that you will continue to be bound by all terms of the contract in the event of such transfer.

It doesn't make sense that any creditor would promise never to sell your loan. For example, if that creditor went out of business, or declared bankruptcy, or whatever, your loan obligation is one of their assets which would be sold to a successor, or assigned by a bankruptcy judge to a successor in interest.

I suggest you painstakingly review the contract you signed and then check with the state government agency in the state where you took out the loans and see what they have to say. For example, in Pennsylvania, oversight of student loans is by PHEAA - PA Higher Education Assistance Agency.

Hope you hang onto those low interest rates.
(I'm a lawyer who deals with a lot of contracts.)

[jiacinto]

8. I think I did get something in writing

I have to check my records.

[burr]

5. part of the Telecommunication Act, thank god fur deregulation...RIGHT??

Now it is legal for lending institutions, banks, and loan sharks to buy and sell such info on the internet. Freedom of information act, only medical records are protected...unless you happen to sign the wrong sheet of paper necessary to see your Doctor.

Ahhh yes, the free flow of information. Technology, and the right to know who is paying up and who isn't. Who has the medical pre-existing conditions and who is young and has the right DNA in their blood samples? Who should we send our loan-sharks to and who should we send our collection freaks to?

[Zo Zig]

7. Consolidation is a one time only deal,

under the title IV program. The other company has sent you a come on.

[jiacinto]

9. Ok

Thanks.

[jiacinto]

10. Problem Solved

I called the company I orginally agreed to consolidate with and they explained the situation. Although they still own my loan they have subcontracted out and/or hired another company to do the administrative aspects of my loan. So basically this new company has been hired to process payments and the original bank I signed up with still has my loans.