BACKGROUND

Wednesday, December 6, 2006

Graduate Leverage


Yesterday, I finally got it together and marked several things off my to-do list. I bought stocking stuffers for everyone and nearly finished up my gift list.

I also contacted Graduate Leverage, the company that consolidated my federal student loans when I graduated from law school. Warning...Shameless Plug: I LOVE GRADUATE LEVERAGE!

Unlike other companies out there, GL was started by a group of Harvard MBA students. As their MBA project, they analyzed the student loan industry and found out that students, particularly those in law and medical schools, were being screwed by the industry. The industry had a captive audience with these students as achieving the dream of becoming a lawyer or doctor means massive debt. The federal student loan program only allots $18,500 a year and most law and medical schools cost far more than that, which means students in these professional schools must apply for private loans.

Private loans are based on individual credit and carry interest rates far higher than federal loans. Students in the professional disciplines were being screwed by the companies.

SO...Graduate Leverage was born out of that MBA project as a collective bargaining tool of sorts. I learned about them when one of the founders did a presentation at my law school during my second year. They are FANTASTIC! They consolidated my federal loans at a very low rate and I am now having them consolidate my private loans, which will save me quite a bit over the long haul.

If you're a graduate student in need of debt consolidation assistance, contact Graduate Leverage. They are great to work with, I've always been able to reach a human being when I call, and they assist with any and all questions ASAP.

Ok, shameless plug over.

2 comments:

East of Oregon said...

I like the shameless plug - I actually need to know things like this, especially since I'm deeper every semester in student loans. THANKS! p.s. I'm home from my Torts exam and I did beat it to a bloody pulp and I won. Damage report at 11. Thanks for the well wishes :)

Raveneye said...

I read your post with particular interest in the section where you stated students in professional disciplines were "being screwed by these companies" - meaning those lenders that offer private or alternative education loans. Perception is a portion of reality and I'm sure alot of students would perceive they are or have been screwed by the companies that provide these loans due to the costs involved.

Allow me to provide a bit of factual background on how these loans work but first, why there is a market for them in the first place.

I work for a education funding company that provides BOTH federal student loans and private/alternative loans for education. The federal student loans (as has been pointed out) come with low interest rates but also low borrowing limits when compared with the overall cost of an education. The resasons for this are complex but can be condensed into a few understandable facts. The funding comes from the government (or you, and your tax dollars)and whether the loans come from a Direct Lending source (DOE) or from a FFELP Lender (secondary market), ultimately those loans are guaranteed by the Federal Government against loss should the borrower go into default and not repay the loan. Costs to keep this program functional run high and come directly from the federal budget - thus the fight to keep interest rates low while balancing the need for higher borrowing limits is an ongoing battle.

Enter the private or alternative loan. Lenders that provide this obviously much needed program have recognized the gap that exists between the borrowing ceiling for federal loans and the overal cost of attaining an education. Face it, without this option, many students wouldn't be able to complete their educations. The most distiguishing factor about this program that contrasts with the federal program is that these funds are NOT guaranteed or protected by the federal government - the risk to lend is entirely on the shoulders of the lender themselves - thus the strict qualifying criteria based upon credit and the assessed ability of the borrower to repay the loan become huge factors. Interest rates attached to these lows have to be higher as the risk assumed by the lender are exponentially higher. If a significant number of borrowers were to default, the lender's portfolio would tank soon followed by the lender. That's not good for business and certainly isn't good for students either.

It is a sad state of affairs that this situation exists, but is a harsh reality of pursuing an education. Perhaps the true "screwing" that is going on is in the cost of the education - when is the last time anyone heard of a four year public or private university lowering their tuitions? Or when was the last time you have seen an Ivy League school close it's doors due to lack of funds?