Careful! Dept. of Education & MOHELA reset loan term without consent
Posted by Inat on 2012-01-17
Like many, I needed fincancial assistance in pursuit of my higher education. I received four years of federal subsidized student loans (Direct Loans / Stafford Loans) and have diligently repaid them for the past 10 years. I had one year left on my loans, that is until the government took over servicing and then RE-SOLD the loan to a different servicer (this is all part of the 2011 Student Loan Reform Act).
As I pay all my bills online, I went to the new servicers website to set up my autopay. I noticed something great - my payment is now $200 less per month! Wait... this is too good to be true. where are the terms? What is my length of my loan? Nope. Not on the website.
A call to the servicer confirmed my suspicion. My loan, set to be repaid in June of 2013 had been reset to the original 10 year term! I asked the CSR when I agreed to that, I was told "You didn't opt out of the loan reset". "Loan, reset?" I ask. "In an effort to reduce your burden, we reset the term of the loan to 10 years. This will save you money."
These loans pay for college - do they think we're stupid? Extending my one year loan to 10 years DOES NOT save me money! It costs me more money in interest!
I guess I shouldn't be surprised - it seems that many "benefits" provided by our gov't over the past few years have a hidden cost. Just be warned - if you or your friends/family have a Federal Loan and are suddenly "given" a lower payment, check the fine print and be smart. Do what I did. Ask them to set the term back to the original maturity date.