Congress Votes to Give Students More Options on Loans

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Repeal of “single holder” rule allows students to seek most favorable rates.

The Senate today passed the Emergency Supplemental Appropriations bill which includes a provision repealing the controversial “single holder” rule. The rule required that borrowers with multiple federal student loans who wished to consolidate do so only through the original lender. It has come under increased scrutiny by student groups, lawmakers in Congress, schools, and leading consolidation lenders—who have characterized it as anti-competitive because of the way it limits options in the student loan marketplace.

The bill, which will provide funding for the wars in Iraq and Afghanistan, homeland security, and Hurricane Katrina recovery, was passed by the House of Representatives on Tuesday. President Bush is expected to sign the bill into law by early next week, enacting the repeal immediately thereafter.

“The repeal of the single holder rule will be a great victory for anyone who needs help in managing their student loan debt,” said Chris Studer, president and CEO of ScholarPoint Financial, Inc. “Borrowers have been denied the advantages of a free market system for far too long. Soon everyone will be able to consolidate their student loans with the lender of their choice—a choice they will now be free to make based on factors important to their individual situation, not a choice mandated by legislation.”

The past several weeks have already seen thousands of students rush to take advantage of favorable consolidation packages prior to the variable interest rate increase due to go into effect on July 1. In accordance with federal mandate, the new interest rates were determined by May’s 91-day Treasury Bill auction. As a result of the auction, Stafford loans in repayment will increase from 5.3 percent to 7.14 percent, Stafford loans in deferment will climb from 4.7 percent to 6.54 percent, and parent PLUS loans will jump from 6.10 percent to 7.94 percent

“The repeal will come at a time when many borrowers really need it,” said Studer. “Variable interest rates on loans will skyrocket on July 1. For most borrowers, that means that they could end up paying thousands of dollars more over the lifetime of their loans unless they consolidate and lock in lower rates before June 30. Under the single holder rule, many borrowers were prevented from refinancing with the lender who offered the most favorable interest rates. Now almost everyone will have a few weeks to shop for the best deal.”

ScholarPoint Financial, Inc. is a national online consumer lending company specializing in student loans and offering a full range of innovative education finance solutions. Loan options for students and their families include PLUS, Stafford, Consolidation and Private loans. ScholarPoint combines industry-leading borrower benefits, best-in-class service and innovative technology. Unlike many other traditional loan sites, ScholarPoint’s technology platform was designed exclusively for its website, integrating the entire process for an online experience that is simple, instant, and complete. http://www.ScholarPoint.com

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Joan Coyle

202-289-3903

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Joan Coyle

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