Consumers Warned About Unethical
July 26, 2007
(SitNews) - The Alaska
Commission on Postsecondary Education (ACPE) and the Alaska Department
of Law are advising consumers to be on the alert for high pressure
campaigns relating to Federal Stafford Education Loan consolidation.
This advisory was generated due to increased reports of Alaska
citizens being targeted with unethical predatory lending techniques.
According to reports received by the ACPE, some lenders that
offer student loan consolidations are making blatant misrepresentations
about the terms of the loans they offer. They claim the borrower
will receive reduced interest rates, lower minimum monthly payments,
cash incentives and borrower benefits, but in fact these claims
don't add up to savings for the borrower.
"It may sound like you are getting a good deal. However,
over the long term you may end up paying more in finance charges
or lost benefits," said Assistant Attorney General Cynthia
Drinkwater, with the Department of Law's Consumer Protection
The following facts are essential to making an informed decision
on your federal education consolidation loan.
No lender or marketer can give a borrower the actual interest
rate on its Federal Stafford Consolidation Loan without borrower-specific
loan data. By federal law, the consolidation loan fixed interest
rate is based on the weighted average of the loans included in
the consolidation, rounded up one-eighth (1/8) of a percent.
If a lender or marketer is quoting you a fixed interest rate
without that information, it is based on general assumptions
which may or may not apply to you.
"The smartest thing you can do when deciding where to consolidate
your education loans is ask questions," says Commission
Executive Director Diane Barrans. "If you need help, don't
forget the Commission is here, and we're happy to help Alaska's
students navigate the consolidation maze."
It is important to understand the impacts of lender "benefits"
that may add up as lender profits rather than student savings.
ACPE and the Department of Law recommend you ask the following
questions before making any decisions on your education loans:
1. Are loan benefits automatic,
or do I have to qualify for them?
2. Are benefits applied annually or one-time only?
3. What percent of borrowers get the advertised rate discount,
fee waiver, or other benefit?
4. Do I forfeit the benefit if I have a late payment?
5. What percent of your borrowers default on their loans?
According to ACPE, it is important
to remember that if you do not already have a financial relationship
with the lender, do not provide personal identifying information
on their internet site or over the telephone, and never provide
your Social Security Number!
For more information about becoming an informed education loan
consumer, ACPE can be contacted toll-free at 1-800-441-2962 (465-2962
On the Web:
Alaska Commission on Postsecondary
Alaska Department of Law
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