Loan companies under fire

Students might need to be more careful in their choice of where to loan money from as several student loan lenders have been accused of delaying consolidation processes.

The lenders are accused of charging the higher interest rates on the loans during the prolonged consolidation process, which went effective July 1.

In an Aug. 30 New York Times article, John F. Wallace, executive vice president of NextStudent, one of the loan consolidation companies involved, said that delaying the consolidation of student loans keeps the individual's loan with the bank or lender longer.

Students were upset when they found out that some banks were accused of collecting higher interest rates because they delayed the consolidation process.

"That's horrible they would do that to students … the banks weren't acting loyal to their customers," said Brandon Glonek, a freshman majoring in pharmacy.

Glonek added that if the allegations turn out to be true, he hopes students wouldn't apply for loans from banks that did this.

NextStudent, Nationwide Student Loan Consolidators and Student Loan Xpress, loan consolidation companies, experienced some delays in the consolidation process, the article said. These companies accused lenders such as Wachovia and Sallie Mae of delaying the consolidation process and violating federal regulations.

NextStudent informed the U.S. Department of Education of the delays, according to the article.

Jane Glickman, a spokeswoman for the Department of Education, said that the department would research each complaint and determine if any further action is required, the article said.

"I think this issue is really shady, and it's really unfair to students and recent graduates," said Jessica Bissonnette, a freshman majoring in pharmacy. "Banks should give students a break, especially with the new higher interest rates."

The UT Office of Financial Aid hasn't had many complaints about consolidating loans this year, according to Amy Burns, debt management adviser in the office of financial aid.

"We haven't come across such problems mentioned in the New York Times article," she said. "However, we've had some students experience a slow consolidation process, but their applications are still being honored."

The process may take time, but the application will be accepted as long as it was postmarked no later than July 1, Burns said.

"As long as the application is fully completed, any additional materials needed are included and it's sent by July 1, the application will be accepted and processed," she said.

About 2.5 million students consolidated their loans last year, according to the article; the Department of Education expects about 2.1 million students to consolidate loans this year.

"I'm not surprised that some students don't receive their loan consolidation confirmation for months," Burns said, adding that there are a lot of applications for the companies to process.

"An individual filed their loan consolidation last year and it was honored, but he did not receive confirmation of the consolidation until recently."

Burns added that there are many factors in determining the interest rate on loans.

"Basically, if other interest rates go up, the interest rates on student loans will, too," she said.

However, Emily Venjamin, a freshman majoring in pharmacy, doesn't agree with where the interest rates are set.

"Students should have lower interest rates on their loans … we'll be paying them off forever," she said.

However, some lenders may have different rates, Burns said, adding that one should always look closely at the fine print to make sure there aren't any hidden penalties.

"A lender may have a lower interest rate, but they may have penalties for missing a payment," she said.

Despite the recent issues surrounding student loan consolidation, Burns said she recommends students to consolidate.

"There are many benefits to consolidating loans, including making it easier to manage your finances," she said.

"You're able to make one monthly payment for all of your loans together, and you get locked into a fixed interest rate."