Single Lender rule strikes again! To hell with antitrust.

[Guest LesterTheNightfly]

I attempted a consolidation with Nelnet. However, I was deemed ineligible. Why? At this time 1 lender holds my most recent batch of loans. The current lender (the current lender changed 3 times in 10 months, BTW) won’t release the loans to Nelnet.

 

The Nelnet CSR told me that unless the current lender wouldn’t/didn’t offer income sensitive repayment or declined my consolidation application that I couldn’t consolidate with them. This really stinks as Nelnet is offering a better program.

 

Sallie Mae will not reduce my interest rate by 1% after 36 payments, but Nelnet will. This has to do with the principal on my loans. So, this “single lender rule” prevents me from availing myself of the best offer—and for what reason? Who sponsored this legislation?

 

This single lender rule, which is of dubious merit, appears to fly in the face of antitrust or restrictive trade practices legislation. Almost always anti-trust legislation prevails when other legislation conflicts with it.

 

Any thoughts?

[fla-tan]

Lester

 

Unfortunately, Congress is exempt from anti-trust rules and they are the ones that passed the HEA (Higher Education Act) with all of it's regulations. The HEA is currently up for reauthorization this year and that is one of the issues that is being addressed, though I don't know how affective the effort to change it will be.

 

BTW, does Sallie Mae own all your loans, including the previously consolidated ones?

 

 

fla-tan

[Guest LesterTheNightfly]

Lester

 

Unfortunately, Congress is exempt from anti-trust rules and they are the ones that passed the HEA (Higher Education Act) with all of it's regulations. It's ridiculous but a known tactic. Congress virtually always exempts itself from the regulation it passes for others. I was aware of this, but the legislation pertains to private firms. On that basis I thought it may still be subject to antitrust legistlation.

 

The HEA is currently up for reauthorization this year and that is one of the issues that is being addressed, though I don't know how affective the effort to change it will be. Not only are we uncertain as to the fate of efforts to change this provision, assuming borrower friendly changes are made there's no telling when said legislation will be enacted. In all liklihood I'm fiting a battle for future borrowers to benefit. I'm OK with that, but, obviously, it would sure be nice if I could benefit too.

 

BTW, does Sallie Mae own all your loans, including the previously consolidated ones?

 

fla-tan

 

I know and will draft a letter to my congressional rep. Thanks for the advice.

 

No, Sallie Mae does not hold my previously consolidated Direct Loan. The Direct Loan will not be included in the consolidation, and I didn't entirely follow the Nelnet CSR's explanation on this point. It had something to do with the single lender law stipulating something about FFELP lenders and Direct is not a FFELP lender & therefore they wouldn't qualify unless I consolidated the Direct Loan with this new one. Now, I must say this sounded inconsistent to me. It would seem to me the Direct Loans either count or don't. The fact that they would count only if included in the new consolidation (over all a worse deal than foregoing the 1% decrease in 3 years) sounds like some sort of double standard. I have yet to investigate any of this stuff. I plan to begin those efforts tonite. Any suggestions?

[Guest LesterTheNightfly]

The single lender rule is found in Section 428C((1)(A) of the Higher Education Act, and includes the following text:

 

( CONTENTS OF AGREEMENTS, CERTIFICATES OF INSURANCE, AND LOAN NOTES.-

 

(1) AGREEMENTS WITH LENDERS.-Any lender described in subparagraph (A), (, or © of subsection (a)(1) who wishes to make consolidation loans under this section shall enter into an agreement with the Secretary or a guaranty agency which provides - (A) that, in the case of all lenders described in sub-section (a)(1), the lender will make a consolidation loan to an eligible borrower (on request of that borrower) only if the borrower certifies that the borrower has no other application pending for a loan under this section and (i) the lender holds an outstanding loan of that borrower which is selected by the borrower for consolidation under this section, except that this clause shall not apply in the case of a borrower with multiple holders of loans under this part, or (ii) the borrower certifies that the borrower has sought and has been unable to obtain a consolidation loan with income-sensitive repayment terms from the holders of the outstanding loans of that borrower (which are so selected for consolidation);