FINANCIAL AID PUBLICATIONS

STUDENT FINANCIAL AID HANDBOOK 2002 – 2003

Chapter Eight

ENTRANCE/EXIT INTERVIEWS AND FEDERAL LOAN CONSOLIDATION

ENTRANCE INTERVIEW

If you are borrowing a Federal Perkins Loan‚ Primary Care Loan (PCL)‚ Loan for Disadvantaged Students (LDS)‚ Health Professions Student Loan (HPSL) or Federal Stafford Loan (Subsidized and/or Unsubsidized)‚ you are required to attend an entrance interview. The Federal Stafford Loan entrance interview is conducted during freshman orientation (NJDS‚ NJMS‚ RWJMS and SOM only). For all other programs‚ there is an online Entrance Interview that can be accessed by going to www3.umdnj.edu/faidweb.

The purpose of the entrance interview is to advise you of your rights and responsibilities and to provide information on the repayment schedules‚ deferments and forbearances.

EXIT INTERVIEW

If you received financial assistance from the Federal Perkins Loan‚ HPSL‚ PCL‚ Federal Stafford Loan (Subsidized and/or Unsubsidized)‚ or any alternative loan program‚ you are required to attend an exit interview upon completion of your degree‚ withdrawal from the degree program‚ or any interruption in enrollment. These interviews are conducted by the Student Loan Office and the Student Financial Aid Office.

The purpose of these interviews is to help you organize your repayment schedule and to answer any questions you may have concerning your rights and responsibilities. At the exit interview you will be given a summary of loans borrowed during your education at UMDNJ‚ information on deferments‚ forbearance‚ repayment and an estimate of your monthly payments.

IMPORTANT LOAN ISSUES

• What are your rights and responsibilities as a borrower?

• Making payments on–time.

• If you cannot make a payment on–time‚ promptly notify the lender or servicer.

• If you believe you are eligible for a deferment‚ forbearance or cancellation be conscientious about filing the necessary paperwork.

• If you move during the loan period‚ make sure you immediately notify the lender or the servicer of your new address. Most problems with student loans start when a borrower moves and payment information or bills are delayed or lost in the mail.

CONSOLIDATION LOAN PROGRAMS

Loan Consolidation enables borrowers to pay off or "refinance" multiple loans with one new loan‚ one interest rate and one repayment schedule. It may be done to alleviate cash flow problems while in repayment. It may be done for convenience to renew deferments or gain access to additional deferments.

Federal Stafford Loans are made to students through two separate programs. Students awarded Federal Stafford Loans through the Direct Lending Program borrow directly through the federal government. Students awarded Federal Stafford Loans through the Federal Family Educational Loan Program (FFELP) borrow through private lenders. As such there are two different consolidation programs.

UMDNJ participates in the FFEL Program. What this means is if you entered UMDNJ without prior student loan debt and borrowed only while in attendance at UMDN‚ you are in most instances limited to consolidate with the Federal Loan Consolidation Program.

In general‚ there are two difference loan consolidation programs available.

Federal Loan Consolidation through the Federal Family Education Loan Program (FFELP) is available from lenders such as banks or similar lending institutions. Federal Loan Consolidation is available to borrowers with Stafford loans from either the FFEL or the Direct Loan Program.

Direct Loan Consolidation through the Federal Direct Student Loan Program is available from the federal government. At least one of the following criteria must be met to participate in Direct Loan Consolidation:

• Must be a Direct Loan borrower

• Available to FFELP borrowers out of school who either:

1. Cannot find a consolidation loan with their FFELP lender or

2. Cannot find a consolidation loan with their lender with Income
   sensitive repayment terms they find acceptable

• Available to borrowers currently enrolled in school if they either:

1. Have Direct Loans or

2. Have no Direct Loans but are attending a school that participates in

the Direct Loan Program

The following loans can be consolidated into either the Federal Consolidation or Direct Loan Consolidation Program:

1. Guaranteed Student Loan (GSL)

2. Federal Supplemental Loan for Students (Federal SLS)

3. Federal Subsidized Stafford (either FFEL or Direct)

4. Federal Unsubsidized Stafford (either FFEL or Direct)

5. Federal Parent Loan for Undergraduate Students (Federal PLUS)

6. Federal Perkins Loan

7. Health Professions Student Loan (HPSL)

8. Loan for Disadvantaged Students (LDS)

9. Health Education Assistance Loan (HEAL)

10. Consolidation Loans (either FFEL or Direct)

The following highlights are intended to briefly describe both consolidation programs. Specific questions not addressed‚ should be directed to your lender and/or Direct Loan Consolidation Originations.

FEDERAL CONSOLIDATION LOANS

A Federal Consolidation Loan enables a borrower with several loans to obtain one loan with one repayment schedule and a fixed interest rate. Non–federal loans made by state or private lenders are not eligible for consolidation.

Consolidation may include in addition to unpaid principal and interest on the underlying loans being consolidated‚ late charges and collection costs that may have been applied to those loans.

A defaulted loan may be included in a consolidation loan if the borrower has made satisfactory repayment arrangements with the holder to repay the loan.

APPLYING FOR A FEDERAL CONSOLIDATION LOAN

Generally‚ a borrower submits a Consolidation Loan application to a lender holding at least one of the loans to be consolidated. If none of those lenders agree to consolidation‚ the borrower may apply to any other lender participating in the Consolidation Loan Program. A borrower whose loans are held by one lender must consolidate with that lender unless the borrower certified that he or she has sought and has been unable to secure a Federal Consolidation Loan with acceptable income–sensitive repayment terms.

LOAN LIMITS

There are no minimum or maximum loan limits that apply to Federal Consolidation Loans.

BORROWER ELIGIBILITYI

To be eligible for a Federal Consolidation Loan‚ a borrower:

• Must be in the grace period or in repayment status on all loans being consolidated;

• If in default‚

• Must have made satisfactory arrangement to repay the defaulted loan and must have at least three voluntary‚ on–time‚ consecutive monthly payments or
• Must agree to repay the Consolidation Loan under the income–sensitive repayment plan (with no payments required prior to consolidation);

• Must not have another Consolidation Loan application pending;

• Must agree to notify the loan holder of any address changes; and

• Must certify that the lender holds at least one of the borrowerâs outstanding loans that are being consolidated or that the borrower has unsuccessfully sought a Consolidation Loan from the holders of the outstanding loans and was unable to secure one.

A married couple may consolidate individual loans if both spouses agree to be held jointly and separately liable for repayment of the Consolidation Loan regardless of the amount of their individual debt and any future changes in marital status. If one spouse dies‚ becomes totally and permanently disabled‚ has collection of his or her loan obligation stayed by a bankruptcy filing‚ or has that obligation discharged in bankruptcy‚ the other borrower remains obligated to repay the loan.

If the borrower is unable to obtain a Consolidation loan from a lender eligible to make such loans‚ the borrower may apply through the U.S. Department of Education for a Federal Direct Consolidation Loan under the Direct Loan Program. The borrower must certify that he or she has been unable to obtain from an eligible lender a Federal Consolidation Loan or a Federal Consolidation Loan with income–sensitive repayment terms acceptable to the borrower. The eligible criteria for Federal Direct consolidation Loans differ from the criteria for the Federal Consolidation Loans.

INTEREST RATES

Contact your loans consolidation program for current rates and specific information.

There are no insurance premiums or other fees for loan consolidation.

The borrower should understand that the consolidation of Stafford Loans may result in higher interest rates that he or she was previously paying. However‚ because Consolidation Loans may have repayment periods as long as 30 years‚ the borrowerâs monthly repayment amount may be reduced.

REPAYMENT

Generally‚ the first payment on a Federal Consolidation Loan is due within 60 days after consolidation. (The repayment period begins on the day the Consolidation Loan is disbursed). There is no grace period. There are a number of repayment options‚ including the graduated and income–sensitive repayment options. The repayment period varies from 10 to 30 years‚ depending on the amount consolidated and on other student loans the borrower may have. If the amount to be consolidated is less than $7‚500‚ for example‚ the repayment period must not exceed 10 years.

All deferment and forbearance options are available to FFEL Stafford Loan borrowers. If a married couple is jointly liable for repayment of a Federal Consolidation Loan‚ the lender may grant forbearance only if both persons meet the conditions for forbearance.

The following are consolidation agencies that UMDNJ graduates typically use:

Sallie Mae
Smart Loan Consolidation
1–800–488–3533
www.salliemae.com/loans/s‚art/html

The Access Group
1–888–250–6401
www1.accessgroup.org/students/repayment/consolidation.htm

Wells Fargo
1–800–658–3567
www.wellsfargo.com

Key Education Consolidation
1–800–446–2810
www.keybank.com

The Higher Education (T.H.E.)
1–866–562–6672
www.northstar.org/consolidation.html

DIRECT LOAN CONSOLIDATION

Direct Consolidation Loans allow William D. Ford Federal Direct Loans (Direct Loan) and Federal Family Education Loan (FFEL) borrowers to combine one or more federal education loans and create one Direct Loan with one monthly payment. Borrowers can extend their repayment periods‚ thereby reducing monthly payments and possibly lowering the interest rate.

APPLYING FOR A DIRECT CONSOLIDATION LOAN

Borrowers submit an application to the U.S. Department of Education‚ Consolidation Department‚ Loan Origination Center.

LOAN LIMITS

There are no minimum or maximum loan limits that apply to Direct Consolidation Loans.

BORROWERS ELIGIBILITY

Borrowers must send a Direct Consolidation Loan application to The Departmentâs Loan Origination Center. A single consolidation application is used‚ even if the borrower is consolidating more than one type of loan‚ such as subsidized student loans and unsubsidized student loans. The publication Federal Direct Consolidation Loan Booklet‚ answers commonly asked questions.

Borrowers may add pre–existing eligible loans to a newly created Direct Consolidation Loan without submitted a new application; borrowers simply submit a request to The Department within 180 days after the loan is originated.

There are two types of consolidation‚ "regular" and "in–school." Borrowers may consolidate loans any time after they are fully disbursed. Consolidation eligibility criteria vary somewhat depending on when borrowers consolidate and whether they are in default. All Direct Consolidation Loan borrowers‚ however‚ received the same deferment‚ forbearance and discharge provisions available to borrowers of other Direct Loans. Note that a borrower who consolidates a loan that is in deferment must re–apply for the deferment once the loan id consolidated.

REGULAR CONSOLIDATION

• A Borrower can consolidate when his or her loans are no longer in an in school period‚ such as during the borrowerâs grace period‚ when a loan is in repayment or even when a loan is in default. A borrower consolidating at least one fully disbursed Direct Loan or FFEL‚ none of which is in an in–school period‚ may consolidate under the regular Direct Loan Consolidation Loan process. A borrower may also include other student loans‚ such as Federal Perkins Loans and eligible health professions student loans.

• Available to FFELP borrowers out of school who either:

1. Cannot find a consolidation loan with their FFELP lender or

2. Cannot find a consolidation loan with their lender with Income

Sensitive repayment terms they find acceptable.

• For married borrowers who want to consolidate jointly‚ only one borrower must meet the conditions described in the preceding paragraph. Joint consolidators are held jointly and separately liable for their consolidation loan‚ however‚ both borrowers must qualify for deferment‚ forbearance and discharge‚ unless a discharge is due to school closure or false certification. In those cases‚ only one borrower has to qualify; however‚ only the portion of the direct consolidation loan affected by the school closure or false certification can be discharged.

• Regular consolidation required that borrowers have no federal consolidation loan applications pending with any other lender (for example‚ a FFEL Program lender). Also‚ borrowers must agree to notify The Department of any address change.

• A regular consolidation loanâs repayment period begin the day the first disbursement is made; the first payment is due within 60 days of the date‚ unless the borrower is in deferment on the consolidation loan. There is no grace period.

• Borrowers in repayment on any loan to be consolidated should continue making payments to their current loan holders until receiving written notice from the Department that it has consolidated their loans. Once the loans are consolidated‚ any payments a borrower makes to the original holder will be sent to The Department to reduce the Dirct Consolidation Loan balance.

IN–SCHOOL CONSOLIDATION

• An in–school period is defined as the period before a loan enters the grace period while a borrower is enrolled at least half time at an eligible school. A loan is considered to be in an in–school period if the borrower entered but never completed the grace period because the borrower re–enrolled at least half time at an eligible school before the grace period expired.

• In–school consolidation requires borrowers to meet the requirements for regular consolidation‚ with some exceptions. Unlike regular consolidation‚ borrowers eligible for in–school consolidation may consolidate only Direct Loans or FFELs; the other types of federal education loans may be consolidated only after borrowers leave school.

• Borrowers attending Direct Loan schools must consolidate at least one fully disbursed Direct Loan or FFEL that is in an in–school period. Borrowers attending non–Direct Loan schools must have a Direct Loan and must consolidate a Director Loan that is in an in–school period. (Note: that borrowers can qualify simply by consolidating one Direct Loan that is in an in–school period).

• Borrowers with no Direct Loans who want to consolidate FFELs must be attending Direct Loan schools. (At least one FFEL must be in an in–school period). Such borrowers do not have to certify that they have been unable to obtain Federal Consolidation Loans ö FFEL borrowers currently are not permitted under the Federal Consolidation Loan Program to consolidate a loan in an in–school period.

• The borrower of an in–school Direct Consolidation Loan receives a six–month grace period on the loan when he or she reduces enrollment to less than half time at an eligible school. For further information and clarification contact the Direct Loan Consolidation Program.

INTEREST RATES

Contact your loan consolidation program for current rates and specific information.

There are no insurance premiums or other fees charged for loan consolidation.

A borrower should understand that the consolidation of loans may have repayment periods as long as 30 years. This may reduce monthly payments

CONSOLIDATION OF DEFAULTED LOANS

Generally‚ defaulted loans may be consolidated if borrowers agree either to repay the Direct Consolidated Loan under the Income Contingent Repayment Plan or make satisfactory repayment arrangement with the current loan holder. However‚ the borrower has only one option to make satisfactory repayment arrangements with the current loans holder in the following two situations:

• The borrower has a defaulted loan and at least one Direct Loan or FFEL in an in–school period and wants an in–school consolidation loan‚ or

• The borrower wants to consolidate a defaulted PLUS loan.

For purpose of consolidating a defaulted Direct Loan‚ FFEL or Perkins Loan‚ satisfactory repayment arrangements are defined as three consecutive‚ voluntary‚ on–time‚ full monthly payments that are reasonable and affordable given the borrowerâs total financial situation. Borrowers eligible to consolidate defaulted health professions loans must contact the loan holders to determine how a satisfactory repayment arrangement is defined.

SUBSEQUENT CONSOLIDATION

A borrower may add pre–existing eligible loans to a Direct Consolidation Loan within 180 days after the date the Direct Consolidation Loan is made. Pre–existing eligible loan is one fully disbursed before the Direct Consolidation Loanâs first disbursement is made.

A borrower who wants to consolidate additional eligible loans after 180 days must complete a new Direct Consolidation Loan application.

REPAYMENT

• A regular Direct Consolidation Loanâs repayment period begins the day the loan is first disbursed. If a Direct Consolidation Loan includes at least one Direct Loan or FFEL that is in an in–school period at the time The Department receives the consolidation application‚ the repayment period begins the day after the grace period ends.

• A borrower who has a defaulted loan and became eligible for a Direct Consolidation Loan by agreeing to repay it under the Income Contingent Repayment (ICR) Plan may switch to a plan other than ICR if he or she:

  • Was required to make‚ and did make‚ a payment under ICR in each of the prior three months; or

  • Was not required to make payments but made three reasonable and affordable payments in each of the prior three months.

In either case‚ a borrower must call or write the Direct Loan Servicing Center to receive permission to switch.

DIRECT CONSOLIDATION LOANS
United States Department of Education
Consolidation Department
P. O. Box 1723
Montgomery‚ AL 36102–1723
1–800–557–7392

IMPORTANT POINTS TO CONSIDER

1. Compare the cost of consolidation versus unconsolidated loans.

2. Check to see how consolidation may impact your Economic hardship Deferment (EHD). EHD is determined using a debt to income ratio. Each year a borrower must reapply to determine eligibility. Lower interest rates on student loans means lower monthly payments‚ which means a lower debt to income ratio.

3. Review the timing of your consolidation application so that you maximize grace periods.

4. You will pay more in interest over the course of an extended repayment period through consolidation. However‚ you can reduce the amount of interest paid by pre–paying your loan at any time without penalty.

5. You may in some cases pay interest at a higher average annual rate because the consolidation rate is rounded up from the weighted average of your former rates. This depends upon the annual rate being used in the conversion.

6. You do not have to include lower interest rate loans such as the Federal Perkins in the consolidation package.

7. Consolidation is different from combining loans. Combining loans merely creates a single payment coupon for multiple loans.

8. Check out multiple Federal Loan Consolidation Programs‚ if applicable. Incentive programs will vary.

An excellent primer on Loan Consolidation can be found at AAMC Student and Application web site.

www.aamc.org/stuapps/finaid/medloans/primer/start.htm