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I am writing to you for guidance on/or referrals facing an unfair consolidation student loan I am repaying. I am currently paying a 14.25% interest rate. Nevertheless, my credit score is 700 and I haven’t had a single late payment on the account in well over six years. I have held the same job for six years. My income has recently spiked as well, and I have no credit card debt. I have attempted to refinance and all the company says they can give me is approximately 14%. Any advice or guidance you could provide will be immensely appreciated. Thank you!
Let me first congratulate you on six years of on-time loan payments, a healthy credit score, and having no credit card debt. These are all things that will contribute to financial success! Given these positive things, I can understand your frustration about being stuck with a 14% interest rate.
While your interest rate is fairly high, I would not characterize your consolidation loan as “unfair”. Rather interest rates vary among lenders just as the price of an identical item will vary depending on the store you buy it at. One store’s “best rate” may be much more than another store’s, even if you have been a great customer. In addition, the Equal Credit Opportunity Act prevents lenders from considering race as a determining factor when issuing credit.
Although you did not specify whether you had a federal or private consolidation student loan, the higher interest rate tells me that it is private. This is good news because private consolidation loans can be refinanced or “reconsolidated” with another lender as often as you want. A federal consolidation loan, on the other hand, while offering a much lower interest rate, can not be reconsolidated to get a lower rate unless there is a new loan to add to it. In addition, a federal consolidation loan can only be obtained through a lender that issued at least one of the original loans that were consolidated.
I would recommend that you carefully shop around for a lender that will offer you a lower rate. The rate a lender will offer on a private student consolidation loan is often the prime rate, which is currently 8.25%, plus a margin determined by the lender. The margin is usually determined partly by your debt to income ratio and credit score. Lenders, such as SallieMae, will offer even better rates or waive fees if you have a co-signer and/or have a history of making payments on time. A great place to begin your search is FinAid at http://www.finaid.org. FinAid is a comprehensive source of student financial aid information. You can find a list of reputable lenders who specialize in both private and federal consolidation loans. Good luck!
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