Loan Consolidation and Credit Freeze Updates

I wanted to offer an update regarding some issues that have come to light in recent days …

(1) RE: Federal Loan Consolidation.
About a month ago, I notified you of pending legislation [at the time it was awaiting the signature of Pres. Bush] and the impact it would have on students, particularly as it relates to loan consolidation. The law has now been signed, so I wanted to discuss some of the direct impacts (this law ONLY ADDRESSES federal, not private loans).

PROS
+ Increase in Pell Grant Funds.
+ Income Based Payment Plan – I’ll write about this separately in a future tip.
+ Interest rate cut – will introduce phased reductions in interest rates on subsidized Stafford Loans for undergraduate students (6.8% currently; 6% on 7/2008; 5.6% on 7/2009; 4.5% on 7/2010; 3.4% on 7/2011; on 7/2012 would revert to 6.8%).
+ Loan Forgiveness for Public Service – borrowers spending 10+ years in public service professions and make income based payments through the Direct Loan program would be eligible to have remaining loan balances forgiven after ten years. Click here for eligible professions.

CONS
- Adverse impact on loan repayment for resident physicians.
- Reduction in government subsidies to lenders.
Unless you’re a lender, this probably doesn’t mean anything to you. Ultimately what it resulted in is the elimination of loan consolidation with private companies (or at least a minimization of benefits to the point that they are no longer "financially legitimate"/smart options). That was disheartening to me due to the fact that most of the best borrower benefit programs (reduction in loan rates for automatic and on-time benefits) were offered by private companies. My biggest fear, however, was that these consolidation programs would go away all together since the benefits were funded through these government subsidies (which are now being used to fund the increase in Pell Grants and the other ‘positives’ mentioned above). FORTUNATELY, the cuts were not as drastic to non-profit consolidation companies. As a result, some of them look the same as they did before the October 1st change. Most notably are programs offered by the State of North Carolina and New Hampshire; programs that have been talked about for a long time due to their strong borrower benefits. So it appears now that unless you’re in a loan forgiveness scenario [as outlined above – in which case you want to consolidate with the Dept of Ed], a non-profit company will be your best financial alternative and where you should begin your informational search. Shopping around is important as there are non-profit programs that offer poor borrower benefits - simply being a non-profit won't guaratee good benefits. For more information, visit the OFS site for links to additional consolidation and loan resources.


(2) RE: Credit Freeze.
I wrote last week about the positive news shared by TransUnion and Equifax wherein they will allow all consumers the ability to freeze their credit (a privilege held only by consumers in certain states where laws had been passed prior to this). Experian was the last of the major credit bureaus to hold out, but I was optimistic they would follow suit. Apparently they read my blog [well, maybe not] as they announced the change the same day last week that I posted it. Much of their fine print looks similar to that established initially by TransUnion:

COST: *Free to victims of identity theft; $10 to others ($10 to freeze; $10 to “thaw”) OR the cost will be whatever your state legislation (if applicable) mandates – whichever $ is less. Click here for an updated list of current state legislation (freeze requirements, fees, etc.).
* Equifax details regarding fees and other specifics are still forthcoming.

TIMING:
- Experian – freeze available beginning November 1
- TransUnion – freeze available beginning October 15
- Equifax – freeze available beginning early November (no specifics announced yet)

This is obviously great news for the estimated 10 million + victims annually of identity theft!