May 23, 2006 Host: Anne O'Dell Guest: Charisse Dengler
Anne and Charisse discuss the pitfalls of the single holder rule for student loans. Duration: 00:04:29
Anne: Hello, I am Anne Odell, and you are listening to Radio JD. The single holder rule for student loans is a little-enforced regulation that has drawn a great deal of criticism in recent months. This rule drastically limits options for education borrowers, and many students are upset about it. Today we are joined by journalist Charisse Dengler, who has been following the recent developments on the single holder rule.
Anne: Charisse, can you tell us a little bit about the role and how it's enforced?
Charisse: Sure. The single holder role is role that states that if all of a student's loans are with one lender, then the student has to consolidate with that lender. It's a rule that basically eliminates competition between loan companies. However, at the moment, there are several ways that the students are getting around the single holder rule. For example, if a student can prove that he has been unable to consolidate his student loans with income-sensitive repayment terms, then he would be free to chose a different lender to consolidate with. Or, another example is that if a student is still in school, he can apply for a Stafford loan from a different lender and if he gets approved for it, he is free from the single holder rule because he has more than one lender; and these are only a couple of the loop holes in the rule. But with recent debates over the Deficit Reduction Act and Higher Education Act, students, parents, and educators have begun to join together in attacking rules like the single holder rule that are not beneficial to students, and student loan companies are fighting back, not only to keep it but to have it enforced more strictly.
Anne: This kind of thing sounds like it would be helpful to some people in the financial aid process. Have you found that the rule helps financial aid administrators at all?
Charisse: Actually, even though you might think the single holder rule would simplify the job of financial aid administrators, most administrators are on the side of the students and parents and are in favor of doing away with the rule. I would say that this is probably because the financial aid administrators mostly serve the students. So when the students are not happy with their loans and their loan companies, it makes the administrators' jobs even harder.
Anne: Now, I know that some companies do stand to benefit a great deal from the enforcement of the single holder role. Can you tell us more about this?
Charisse: Sure. There are large loan companies such as Sallie Mae that do stand to gain a lot if the rule is enforced strictly. Sallie Mae, for example, is the largest student loan lender in America and the second most profitable company in America. However, the main reason that they hold both of these positions is because the single holder rule eliminates their competition. Sallie Mae, for example, currently holds around 127 billion dollars in student loans for 9 million borrower. If you think about those figures, it's easy to see understand why companies such as Sallie Mae want the single holder rule enforced because it ensures that their 9 million borrowers will be locked in for the long run, and in fact, Sallie Mae has been lobbying heavily for the enforcement of the single holder rule and has even been known to contribute hundreds of thousands of dollars to influential government leaders who are in support of anti-consolidation and single holder legislation.
Anne: Ok, so why are students upset about this rule being enforced?
Charisse: Well, students are mainly upset because whenever competition between lenders is prohibited, they are the ones that suffer. It's competition that keeps prices down; so without competition, students and their families are suffering financially. And at a recent Sallie Mae seminar in Los Angeles, there were students who were there who were protesting the rule, saying that they wanted to make sure that other students across the country were aware of it because many times, loan companies will lure students in without telling them the full benefits and the down falls of consolidation and they want to make sure that students know about what they're getting into before they go into it. And the single holder rule, if it is enforced, will end up costing students a large amount of money over the life of their loans since they will be unable to consolidate with lenders who are offering lower rates, and if they don't know what they are getting into when they go into it, it could also cause a lot of stress and headaches for them and their families, as well.
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