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Personal Finances / Paying Back Student Loans


Subject:  Re: Lending Institutions - Direct Consolidation? Date:  6/24/2001  11:14 AM
Author:  W505a Number:  329 of 4855

hberes writes:

<<For in-school Direct Loan consolidation, you need to be in one of two scenarios:

1. Attending a Direct Loan school AND have a Direct Loan (or other FFEL) in an in-school status

2. Attending a non-Direct Loan school AND have at least one Direct Loan

Odds are if you're at a Direct Loan school you have Direct Loans, otherwise you're at a non-Direct Loan school and have other FFEL loans.

This case is actually for my brother, and he does not attend a school that is part of the Direct Loan network. That is why he has all his loans through THE. So he falls into category 2. He doesn't have any Direct Loans, so he's out of luck. He'll have to consolidate through THE instead of Direct Loans. It will still lock in 5.39%. But how nice would 4.59% have been? :)>>

Where I got lost was figuring out how he fits into Category 2 above---simply because you are also saying that he doesn't have any Direct Loans either. You must mean a second category that's in Direct's text, not the "2." above.

Like I mentioned, the best he could have done was 4.7%, since they round the 5.39% up to the nearest eighth (5 4/8% or 5.5%).

He can also achieve almost this rate if he graduates between July 1, 2002 and June 30, 2003, AND the last T-bill auction of May 2002 has an investment rate of 3.05%. (This is of course because the grace period interest rate add-on is only 170 basis points.) After July 1, 2003 it turns out (I had thought it was October 2003), the Higher Education Act rate statute has to be extended--and I still hold the view that it's anybody's guess what the new rate structures will be. (Part of the add-on interest rate is supposed to cover for "servicing costs", which are dropping consistently because of things like internet technology.) So there's still a lot of hope out there.

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