SLMA instigates temporary refusal of consolidation loans

Cougar News Staff

The Student Loan Marketing Association, the nation's largest student-loan provider, an-nounced in December that it will not accept applications from students who wish to consolidate multiple education loans.

Congressional legislation passed in November means rising costs for Sallie Mae (SLMA), which renders consolidation loans impossible, according to spokeswoman Denise Rossitto.

"We have suspended consolidation practices entirely," she said.

Sallie Mae coordinates about 40 percent of all student loans nationwide, as well as 35 percent of consolidation loans, Rossitto said. The agency typically received from 5,000 to 7,000 consolidation applications per month.

Sallie Mae also will not process consolidation loans for students who rely on bank-financed loans, at least temporarily.

All the changes in policy will last "a minimum of four months," according to Rossitto.

The shutdown was caused by the Emergency Student Loan Consolidation Act, backed by congressional Republicans as a measure to solve the problem of backlogged direct-loan consolidations.

The act permits students to leave the direct-loan system, by which the government provides loan capital to students directly through colleges and universities, when consolidating their loans.

Under the old system, students with both a direct loan and a Family Federal Education Loan (a bank-administered system) could consolidate only under the direct-loan program.

Sallie Mae will reportedly suffer substantial new operating costs in adapting to the new system and its rules.

Republican leaders formed the act to help about 80,000 students and graduates who could not get loan consolidations because of programs in the direct-loan program.

The agency has said it will try to find ways for students with multiple loans to extend payments or arrange more manageable payment plans.

"We don't want to leave them without options,"said Rossitto.

Visit The Daily Cougar