IMPORTANT DISCLOSURE ABOUT REFINANCING YOUR STUDENT LOANS
You are eligible to refinance both private and Federal student loans with this private consolidation loan. If any of the loans that you are refinancing are Federal student loans, you should be aware of the following important facts about how refinancing may affect your rights.
1.A Federal student loan is made according to rules set by the U.S. Department of Education. Federal student loans typically have fixed interest rates, meaning that the interest rate on a Federal student loan will never go up or down. In addition, Federal student loans have longer default periods than private student loans.
2.Federal student loans also permit borrowers in financial trouble to use certain options, such as
3.Depending on the type of Federal student loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active duty service member and you obtained your Federal student loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan. (Note that the interest rate cap of six percent that is applicable to Federal student loans is also applicable to private student loans, including private consolidation loans, but only if you obtained your private loan before you were called to active duty.)
4.Congress could also provide additional benefits in the future that would apply to your Federal student loans.
5.If you are unable to pay your Federal student loan, the government can refer your loan to a collection agency or sue you for the unpaid amount. In addition, the government has distinct abilities to collect the loan, such as taking your tax refund and applying it to your loan balance and invoking an administrative process for garnishing your wages.
6.A private consolidation loan is not a Federal student loan and is not regulated by the Department of Education. A private consolidation loan is instead regulated like other consumer loans under both state and federal law and by the terms of the loan agreement with your lender.
7.If you refinance your Federal student loan, your new lender will use the proceeds of your new loan to pay off your Federal student loan. Subject to certain legally required exceptions, lenders making private consolidation loans do not have to honor any of the benefits that apply to Federal student loans. Because your Federal student loan will be gone after refinancing, you will lose any benefits that apply to that loan.
8.Your private consolidation loan may have either a fixed or variable interest rate. If your private consolidation loan has a fixed interest rate, it may be less than the rate of your Federal student loan and it will never change. If your private consolidation loan has a variable interest rate, that rate may currently be less than the rate of your Federal student loan, although the interest rate may go up or down in the future.
9.If you don’t pay a private consolidation loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
10.If you are a borrower with a secure job, emergency savings, strong credit and are unlikely to need any of the options available to distressed borrowers of Federal student loans, a refinance of your Federal student loans into a private consolidation loan may be attractive to you. You should consider the costs and benefits of refinancing carefully before you refinance.
You should also be aware that some of the same concerns that apply to refinancing your Federal student loans may also apply when you are refinancing your private student loans. Some private student loans also have fixed rates, offer certain protections to borrowers in financial trouble, offer loan forgiveness in some circumstances, and offer various other benefits, including rate reductions for
Remember also that like Federal student loans, most private consolidation loans cannot be discharged if you file for bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers. Again, consider the costs and benefits of refinancing carefully before you refinance.
Updated 1.19.17