Today the largest FFELP lender, Sallie Mae, pulled out of the FFELP consolidation market. Consolidation loans are a tool to provide relief to borrowers by extending the term of their underlying Stafford loans up to 30 years from the out of the box 10 years. By doing so, the monthly payment is decreased. This of course increases the amount of interest to be paid over the life of the loan. But there are no prepayment penalties on FFELP loans, so a borrower is certainly free to make principle payments of any amount at any time. But the lowered payments as a result of the lengthened payment term provides some cash flow relief for recent graduates.
But why did Sallie Mae pull out of the market? We’re quite sure the decision was simple: FFELP loans are no longer profitable. There’s no reason that a for profit company would pursue an aggressive money-loosing product line..
The Department of Education still hasn’t done anything to fix the issue, but then again, they don’t make the laws to incent private lenders into the marketplace, they merely regulate the marketplace.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment