Student Loans – What Happens When They Are Sold To Another Company?
Feb.20, 2010 in
Student Discounts
I’m looking for a consolidation loan. There are so many companies out there. I heard that some of the companies with great promotional interest rate discounts (e.g. for on-time payments, enroling in auto debit etc.) turn around and sell your loan to another company. When this happens, do the terms have to remain the same as the original consolidated loan (ie interest rate, payment schedule etc.)? I’m hearing mixed things about this. I contacted the Federal Student Loan information center and was told conflicting things as well.
February 20th, 2010 at 8:09 pm
The “incentives” that lenders offer you to get you to consolidate are always subject to change, although most lenders will not do this because they want to keep your business. Typically if a loan is sold all of the terms will remain the same (the interest rate without any incentives has to stay the same). It is possible that they can change, but very unlikely. In the 2 years that I have worked for a student loan servicer and seen many lender sales I have never seen somebody lose an incentive only because of that. If it switched lenders and they ignored the correspondence from the new company so made their payments late…well thats another story!
February 20th, 2010 at 9:04 pm
When your student loan is sold, it can result in a change of servicers. (Student loans are most often sold to a secondary market when they enter repayment. They can also be sold to another bank at any time due to bank mergers or banks choosing to liquidate their student loan portfolios.) Although the original terms of your loans will not change, the address to which you send payments and the date on which payments are due may change. It is therefore important to read all the correspondence you receive carefully. It is also important to ensure that the servicer has your current address and contact information. Students who ignore their mail and phone calls are more likely to be delinquent on a payment and to default on their loans.
February 20th, 2010 at 10:17 pm
There is usually nothing wrong with a situation like you describe. A word of caution though, save your original contract, read the terms very carefully, and do not sign unless you are satisfied.
You are not liable for any contract terms you did not agree to, on the original contract, that includes interest, and total amount due.
It is not unusual for many lending institutions to sell payment contracts, and most are very reliable, like I said, save all of your original, signed payment contracts.