Is Student Loan Consolidation A Scam?

[tpskrb1]

drnaoum - you said that you are "confident these companies are not scammers" but I have read that student loan xpress has been illegally paying colleges money to get loans...and they actually cost students more money - why do you guys recommend this company?

Here's the article I read: http://www.jsonline.com/story/index.aspx?id=594385

[Adminnaoum]

...but I have read that student loan xpress has been illegally paying colleges money to get loans

Good question.

When I wrote that post, I had not seen the news stories on this topic and had not known about the history. I was as surprised as everyone else to see it.

It is important to note that the problem is with new student loans (that get funding while a student is in school), not consolidation loans (which happen after graduation and are a private - but federally guaranteed - loan), which is what we have been recommending them for.

When we first started working with financialaid.com they were an independent company. In the interim they were purchased by CIT and folded into the studentloan xpress branch (which, if I understand things correctly was also a recent purchase of CIT). CIT is a major financial firm that has a portfolio in excess of $74 billion, so it is highly motivated to keep all its dealings above board. They fund their own loans and are, generally, a good company.

I started working with financialaid.com because they had good deals for students. The interest rates were at or lower than competitors, and they gave students up to $2000 back when they consolidate. Giving money to students is very different than paying financial officers and colleges. So, it seemed (and still seems) that this a good deal for students.

The problem, as I understand it, is that they were paying schools to be on their preferred list, and most students rely on their schools for loan companies, so the company had little competition. I don't know what the deals were.

In the last two weeks I have been debating whether to keep student loan xpress on our list. They still have potentially the best deal for students (when you don't go through your school) and I've never had a complaint about them.

However, I sure don't like having to defend my decision to work with them, and I blame them for that - and I certainly DO NOT approve of their practices with paying schools. As I read more on this topic it seems clear that paying schools to be on a preferred list is widespread in the industry, but is illegal, so that's not good.

I recommend that every person considering consolidation should do comparison shopping. Find out where the best loan is, what the best terms are, and whether the company is there for the long haul.

So, here's the question to studentdoc members. Should we keep student loan xpress on the recommended list? Take a look at the loan they offer, and that of competitors, and make a recommendation. If 20 or more current members vote on this, we'll abide by the user's decision.

Student Loan Xpress Poll

[sandybakerevans]

There are many non-profit organizations in each state that are not driven by stock holders and profits but are driven by a true desire to be of service to students, parents, schools and organizations.

I would suggest each person investigate their own state non-profit lenders and compare those programs against the programs being promoted by the schools and by this site -

Things to look for:

(1) Is the company an authorized federal lender? If they can not answer an immediate yes then chances are this organization is selling your name to someone else!

(2) What do you have to do to earn the benefit or discount being offered by that lender and more important what do you have to do to KEEP that benefit after you earn it? Most of the programs don't offer permanent benefits but they offer you a benefit that you will loose if you make one mistake over the life of the loan - in some cases that could be 30 years or more!!!!

These federal loan programs are good programs - they are here to help people get an education but like everything else sometimes people take their eye off off of the goal - -- just ask questions - read the fine print - get promises in writing and find someone you can trust - we are out there!

[kingloo]

I am currently searching for a company to consolidate my student loans. I have received numerous mailings from Student Loan Xpress and I am considering using them to consolidate. I have been reading some things about them and got a little hesitant, but wanted to research myself and see what the deal was.

Here is what I found out:

1. Consolidating my loans has nothing to do with the preferred lenders list.

2. It really doesn't matter what company you go with because all the rates are set by the government.

3. The students have not been affected by ANYTHING the media is saying because (even though there are preferred lenders list) it really doesn't matter what company you go with because they all have the same interest rate.

The media has blown this way out of proportation, saying that the students have been screwed over. They have not. Not in the least bit.

As far as Student Loan Xpress goes, after reading up on them a lot, I found that everything they did was legal. They did not pay off financial aid officers, rather taking them out to lunch when they met with them. The officers who had stock in Student Loan Xpress bought it legally. Despite what everyone says, I am going to go with this company because they actually have the best deal. No other company offers a cash rebate like they do. Even though the interest rate is the same with every company, no one offers cash back like they do.

There are a couple of other companies that I have read up on that I would recommend. Educational Direct and Next Student.

[sandybakerevans]

Just for the record not ALL student loan consolidation companies are equal -as a non profit in the state of Ohio we have access to tax exempt funding which allows us to pass this savings along to the consumer and we and many other non-profits around the US offer better programs - our cost of funds is lower - it only make sense.

Several companies have comparison charts on their web sites - charts that actually compare benefits and a few actually identify the "gotcha's - you know those little fine print hooks that tell you what it really takes to get AND KEEP a benefit. That fine print or that print with a spin that people hope you don't read and people hope you don't really understand!

Questions you should be asking:
1. are you an authorized federal lender - if the company can not answer with a resounding YES then guess what - they are selling your name to someone who is!

2. What do I have to do to get the benefit/discount BUT more importantly what do I have to do to KEEP the benefit? Lenders can offer you the world but they bet on the fact that you won't be able to earn and KEEP the benefit/discount they offer - if everyone earned and kept the benefits offered they would go broke!! So just make sure if someone is offering you something ask these questions and make sure that "fine" print backs it up.

3. Does the lender sell your loans and if they do is there a guarantee (in writing) that the benefits offered will not be lost.

4. all lenders participating in federal loan program have the same rules and starting point for interest rates - their individual discount/benefit programs can then offer reduced rates or "cash back". You know what "they" say - if it looks too good to be true chances are there is a "gotcha" somewhere.

As for ethics and integrity - well I think actions speak for themselves as they relate to the lenders you promoted and the legal issues facing at least two of your recommendations - but we are all entitled to an opinion.