Frequently Asked Questions

Private Consolidation Loans

What are the typical advantages of a private consolidation loan?
• Lower monthly payment by extending the loan term to 30 years
• One bill for all private loans

I obtained a fixed rate on my Federal consolidation; am I able to do the same with my private loans?
Borrowers cannot currently lock in rates on private consolidation loans. Federal consolidations carry fixed rates due to government subsidies and guarantees. Since private loans are unsecured (no-collateral), lenders price private loans based on their cost of funds (typically tied to LIBOR or Prime Rate plus a margin or credit spread that protect against an individual borrower’s credit risk.

Won’t I pay more interest over the life of the loan by consolidating?
Although borrowers will pay more interest over the life of your consolidated loan (because of the term extension) they benefit by having reduced monthly payments. Additionally, research has shown that students tend to pay down there loans over 7-10 years, in which case they will pay less interest over time. Therefore, borrowers benefit by taking advantage of lower monthly payments during the immediate, post-school (and typically lower income years) while maintaining the flexibility to accelerate payment of the loan as salaries rise.

Who is the Loan Sponsor?
Meritas Educational Funding (Meritas) is the sponsor of the private consolidation loan.

Who is the lender for the Meritas Private Consolidation Loan?
The lender is CIT Group. Founded in 1908, CIT has nearly $60 billion in assets under management and possesses the financial resources, industry expertise and product knowledge to serve the needs of clients across approximately 30 industries. CIT is a Fortune 500 company and a component of the S&P 500 Index. CIT's Specialty Finance (consumer) business consists of home lending, student loans, vendor financing, small business loans, small/mid ticket product leasing and global insurance services.

What/who is the servicer of the Meritas Private Consolidation Loan?
The servicer manages billing, payments and is the interface for the borrower. The servicer for the private consolidation loan is the Education Loan Servicing Corporation. Education Loan Servicing Corporation, a member company of CIT Group, Inc. (NYSE: CIT), is a national loan servicer of Federal Consolidation, Stafford, PLUS and alternative loans.

Can I use a co-signer to lower my rate?
Yes. Having a co-signer of equal or better credit rating will lower your interest rate.

What is a guarantee fee/origination fee and why does is it added to my principal balance?
A guarantee fee is % of loan balance that is added to the loan balance to insure the loan in event of default. Creditworthy borrowers will pay a negligible fee. To prevent borrowers from paying this fee “out of pocket,” the fee is not due up front and instead is added to the principal of the loan and paid out over the life of the loan.

I don’t remember paying an origination fee on my Federal loan consolidation?
Lenders who participate in the federal loan consolidation program often subsidize this fee as the loans are re-insured and backed by the federal government. The private loan market has no government subsidies or guarantees and lenders are forced to self-insure the loans they make or purchase insurance from a third-party.

I am entering my residency. What will happen to my loan payments and interest while I am in my residency?
Enrollment in a residency or internship qualifies you for automatic deferment (for 48 months or until your program’s completion – whichever is shorter). In addition, you will have the option of up to three additional years of residency/internship forbearance to guarantee that you don’t need to make any payments on your loan for up to seven years. Interest accrues and will capitalize at the end of each forbearance/deferment period.

Example:
For a 6 Year residency program borrower would qualify for 48 months of deferment (interest capitalizes in month 48), 24 months of forbearance (interest capitalizes in month 60 and 72). Payments would begin in month 73.

Is there a grace period on the private consolidation loan?
No, since private loans are only consolidated once they enter repayment, the borrower has effectively “used up” his/her private loan grace period. A borrower should expect to receive a bill within 60 days of loan funding.

What is the minimum balance?
$10,000. The addition of the guarantee fee to the principal counts in determining the minimum

Can I reconsolidate more than once if my credit profile changes or other benefits are negotiated in the future?
Yes, unlike federal loans you can reconsolidate as many times as you would like.

What is an APR and how does it differ from the interest rate?
The APR (Annual Percentage Rate) is the yearly cost of the loan including interest and the origination fee, expressed as a percentage. The APR gives the borrower a number to compare to among different loan products and is designed to minimize the difficult in comparing terms among lenders. Some companies may offer a low fee, but have a higher interest rate, while others may charge a high fee with a lower rate.

How are my monthly payments determined?
All qualified borrowers will receive a 30 year term and the lowest possible monthly payments. Borrowers can choose to pay more than the minimum, with no penalty, to further reduce their principal payments.

Should I make payments on my private loans if I am in the process of consolidating?
Your consolidation takes between 30-45 days to fund and if a payment is due on your existing private loans during this time frame you should make the payment or request a forbearance from your lender.

Do my existing private loans have prepayment penalties?
This is at the discretion of the original lender. Some lenders may have a prepayment penalty or a repayment penalty that is added to the principal balance at the end of the borrower’s grace period.