A Consolidation loan can simplify the loan repayment process by allowing the borrower to combine several types of federal student loans and repayment schedules into one. The repayment process is simplified because only one payment must be made each month. Often, the interest rate on the consolidation loan is lower than what is currently paid. Even if a borrower is in default on a federal student loan, they might be eligible for a consolidation loan if certain conditions are met.
Why go through student loan consolidation when according to the Federal Register, student loans are securitized which means that student loans were sold or are pooled with other student loans and endorsed into a trust.
These trusts are called asset backed securities.
What is an Asset Based Loan?
A commercial asset based loan provides businesses with immediate funds and ongoing cash flow based on a percentage of the value of your company’s assets such as commercial accounts receivable, inventory, business equipment and machinery, and recurring revenue contracts. Funds from asset based finance can be used for day-to-day operating expenses, or as capital for restructuring, turnarounds, mergers and acquisitions and buyouts.
How does Asset Based Lending provide working capital?
First Capital assigns your business a revolving line of credit based on a percentage of each of the qualifying asset classes. You may draw on your line of credit whenever needed and pay back to increase availability for future use. You only pay interest on the funds you’ve drawn down so overall, it’s less expensive than a term loan.
Federal Reserve Expands Facility to Aid Student Loan Market
All notes securitized by a transfer of the “borrower’s” or grantor is void and uncollectible. Also, securitization of a COPY of the note is a violation of the Uniform Commercial Code Article 9. If the note is not endorsed into the trust the note is void and uncollectable.
Note: Student loan debt collectors violate the Fair Debt collection Practices Act because they threaten to take you to court and they have no intentions of doing so. In some cases this violation is worth $1,000.00 fine.
Problems With Consolidation
1.If you have relatively new loans, you probably won’t save as much on interest through consolidation. This is because interest rates on federal loans made after July 1, 2006 are fixed. The interest rates for consolidation loans are calculated based on the average interest rates of the loans that you are consolidating. If you have variable rate loans from before July 1, 2006, you may be able to get very significant interest rate reductions by consolidating. The interest rate (valid through June 30, 2012) for loans first disbursed between July 1, 1998 and June 30, 2006 is 2.36% for loans in repayment. You can get an even lower rate of 1.76% if you consolidate during your grace period. These low rates will be locked in for the remaining life of the loan. Federal student loan amounts and terms for 2011-12.
2. Consolidation extends repayment, often lowering monthly payments, but creating more overall costs in interest over the life of the loan, and extending your obligation further into the future. If you are close to paying off your loans, consolidation may not be worthwhile.
3. You may lose some rights by consolidating. This is most clearly a problem if you consolidate federal loans into a private consolidation loan (you would lose the rights associated with federal loans). You may also lose some options and protections if you consolidate certain federal loans, particularly Perkins loans, into other federal loan programs.