Yes, You Can Consolidate Private Law School Student Loans

While teaching my class this semester I learned something surprising from one of my students, a loan officer, that now Private Law School Loans can be consolidated! Since he provided this information to me and is a loan officer as well I asked him to guest post on my blog and provide this information directly to all of you suffering from private loans.

Private Loan Consolidation: Myths and Facts - Guest Post - Alan De Peters, 3L

By: Alan De Peters, 3L, Quinnipiac University School of Law student and loan officer

Dear Fellow law students and young attorneys:

There seems to be a pervasive myth about all of those pesky private student loans that many if not most of us have had to take on in furtherance of our law school education. Put simply, everyone seems to believe that this "private" debt CAN NOT be consolidated, thus dooming the lowly law student to a lifetime of high interest payments and tons of checks to write every month. Up until a year or so ago I would have agreed, but times they are changing.

The truth is that many, if not most, private loans can be consolidated through private banks and loan consolidation companies. In fact there are at least 10 nationwide large financial institutions, some as recognizable as Key Bank and Wachovia, that will consolidate these types of debts. In fact the website FinAid, which can be found at http://www.FinAid.org/, lists a number of these financial institutions and the specific programs that each bank offers for consolidation. It is a great place to start when researching which particular bank and loan will be right for you.

Once I convince folks that consolidation is possible, they indubitably bring up the next myth; that a law student right out of law school, or a young attorney, will not be able to get one of these consolidation loans due to lack of work experience, sufficient income, etc…. This myth is only partially true. While most, if not all of these banks will require that the loan applicant show how much money they make, the assets they have, and that they have been employed for two years, the law student or young attorney has more bargaining power than they think they do. For instance a bank might be willing to waive their two year employment requirement if the applicant can show that they are coming directly out of school. Further, the bank might be willing to accept a letter from the applicant’s employer stating annual salary in lieu of two months pay stubs and bank statements. The key is to NEGOTIATE. Remember these banks are in the business of making loans; they won’t make any money unless they make loans, and the trick is convincing them to make the loan on the best terms possible.

Solo attorneys will often state that this is all fine and good for someone working for a firm, but .......

what about me? Even those working on their own can enjoy benefits of private loan consolidation. For instance the applicant may be able to defer their federal debt as a hardship while they build monthly cash flow statements in order to prove to the private consolidator that they can afford the loan.

In sum, there are options out there for the law student or attorney that wants to consolidate their private debt in order to save on interest and the headaches of writing so many checks.. By comparing what you pay now to what you would pay after consolidation you can see how much per month you can lower your monthly bills.

One further note, when the federal government passed the "debt reconciliation act of 2006" which raised student loan interest rates to our detriment, they also gave us a life line. The act, for the first time, allowed graduate and law students to borrow their full $18,500 in the form of a Stafford loan, but now allows them to borrow up to the cost of attendance on a federal PLUS loan. Previously the law student’s only choice was to go for a private loan.

The advantage of these PLUS loans is that they can be consolidated right along with all other federal Stafford loans that a student may have, and will carry the same federal privileges that Stafford loans do, such as consolidation, low interest rates, deferment, etc. Further, this is great for those of us with private loans. It essentially means that the banks will be making less and less private loans as students jump lock stock and barrel into the PLUS loans. Thus, the private banks will be in need of consolidation business to expand revenues and there won’t be that many new private loans being originated. In my opinion this will make competition in the market for private loan consolidation fierce and lead to some pretty good deals for us.

I hope that this posting has debunked some of the myths surrounding private loans. Good luck to everyone and remember this debt is good debt; it was taken on in pursuit of an education and an education no one can take away.