et back on track and repay your federal student loan debt. It’s easier than you might think!

If you’ve defaulted on your student loan, then you’re probably aware of some of the serious consequences: you become ineligible for student financial aid, your credit history is damaged, your wages, or your federal and/or state tax refunds or other federal payments may be garnished and you may be sued.

We want to help you get back on track by explaining the options that are available for clearing up your defaulted loan. Why should you bother? Well, you may be returning to school and need financial aid, you may be about to make a major purchase and need to “clean up” your credit report, or you may be questioning whether the debt is even yours.

Cleaning up your credit is going to take some time, but with patience and persistence, you can do it. There are several ways you can repair your defaulted student loan:
• pay your loan balance in full
• make satisfactory repayment arrangements with the holder of your loan
• rehabilitate your loan(s)
• consolidate your loans

Whichever option you choose, make sure you keep copies of all correspondence. You may need them to verify your status as your records are being updated.

This information is provided to you by EdFund. If your loan was guaranteed through EdFund, we can help you resolve a default. Call us toll free at 1.800.367.1589.

If you don’t know who the holder of your loan is, contact the National Student Loan Data System (NSLDS) at www.nslds.ed.gov or 1.800.4FEDAID (TDD 1.800.730.8913).

Option: Pay Your Loan Balance In Full
Paying off your loan in full is the quickest and easiest method for resolving your defaulted loan. When you pay off your debt, you may immediately regain eligibility for most forms of financial aid and your credit report will be amended to reflect your new status, improving your credit score. (However, keep in mind that your credit report may take up to 60 days to reflect a paid-in-full-status.) To exercise this option, contact the holder of your loan to determine the payoff amount, which may include principal (the amount you defaulted on), accrued interest and any collection costs that have been prescribed by law.

Option: Make Satisfactory Repayment Arrangements
If you can’t afford to pay off the loan, making payments is the next best thing. This option re-establishes your eligibility for financial aid benefits after you make a specified number of payments to the holder of any loan(s) in default. In order to regain eligibility for most financial aid programs, you must make six consecutive qualifying payments. A qualifying payment is one that is made:
• voluntarily (not made via federal and/or state payments, wage garnishment, etc.),
• on time (within 15 days of the monthly due date),
• in full (partial payments, unless otherwise agreed upon, don’t qualify).

Note that this option may only be used once to regain eligibility for federal student aid and even though you’ve made payments, the loan is still considered in default status. You must continue to make payments or maintain your repayment agreement with the holder of your loan(s) in order to maintain your eligibility for financial aid.

After you’ve made your sixth payment, you may become immediately eligible for financial aid to cover your current period of enrollment. Also, after the sixth payment, it becomes easier to make the next three payments to qualify you for loan rehabilitation, with still more benefits!

Option: Rehabilitate Your Loan(s)
Thousands of borrowers have rehabilitated their student loans and improved their credit ratings. When you rehabilitate your loan, you regain all the benefits you had on those loans prior to default, including any interest subsidies, if applicable. If you successfully rehabilitate, you may also apply for deferments or forbearances with your new lender. In addition, your credit report will be amended with positive remarks to reflect the new status.

With rehabilitation, after you’ve made nine qualifying payments in 10 consecutive months, your defaulted loan may be purchased (paid off ) by a participating lender, thus retiring the defaulted debt. You’ll then have a new loan and will have up to 10 years to repay (the nine payments you just made count toward your first year). Once you rehabilitate, if the monthly payments become unmanageable, your lender can help you with a variety of repayment options.

In order to qualify for rehabilitation:
• Your loan balance must be over $500 when your loan is sold to the new lender.
• You must make nine qualifying payments in 10 consecutive months.

In addition to those mentioned above, loan rehabilitation has many benefits:
• Eligibility for federal benefits:
o You may now qualify for federal financial aid.
o Your rehabilitated loans may qualify for payment of interest benefits.
o You may qualify for deferments and forbearances.
• Your credit report will be amended, improving your credit score, and you may be able to benefit more from consumer lending programs.

Option: Consolidate Your Loans
Your defaulted loan can also be paid off through a consolidation loan, which enables a borrower with several loans to obtain one loan with one interest rate and one repayment schedule. As with rehabilitation, the defaulted debt is retired (paid off) and a new loan is made. Consolidation loans also have expanded repayment terms, which can make repayment more affordable. You should be aware that extended repayment periods usually mean increased interest costs—you’ll pay more in the long run.

To qualify for a consolidation loan, you must:
• make three consecutive qualifying payments on the defaulted loan, or
• agree to make payments under the income-sensitive repayment option for consolidation under the Federal Family Education Loan Program or income-contingent repayment option for consolidation under the Direct Loan Program.

If you have previously consolidated your student loans, you can only re-consolidate under certain narrow circumstances. Contact a participating lender for more information. More information about consolidation loans can be found on the EdFund Web site at www.edfund.org.

Once you’ve consolidated your defaulted student loans, you’ll enjoy the following benefits:
• The defaulted loans are paid in full, transferring the debt to a loan in good standing.
• Credit remarks on defaulted student loans are updated from “collection account” to “paid collection account,” typically improving your credit score.
• You may immediately regain eligibility for most financial aid programs.
• You may be eligible for deferments on the new consolidation loan.
• Your monthly payments may be reduced if you exercise extended repayment options.

Resolving a dispute
If you feel the default was in error, your first step should be to contact your loan holder and discuss the issue. The holder’s representatives will point out some of your options and guide you through any appeal processes. If your loan was guaranteed through EdFund, contact us toll free at 1.800.367.1590. In addition, some holders of defaulted loans, including EdFund, have a student loan ombudsman who can review your case objectively. The U.S. Department of Education also offers a student financial aid ombudsman, who can assist you if you have a dispute with your student loan or any other financial aid related issue that could not be resolved through established channels.

EdFund – Ombudsman
P.O. BOX 419045
Rancho Cordova, CA 95741-9045
916.526.8024
Fax: 916.526.8518
www.edfund.org

U.S. Department of Education
FSA Ombudsman
830 First Street, NE 4th Floor
Washington, DC 20202-5144
1.877.557.2575
Fax: 202.275.0549
http://fsahelp.ed.gov

Understanding your credit report
Credit reporting and credit scoring are complicated. Lenders and student loan guarantors are required by law to report student loan activity to national credit bureaus so that creditors can make informed lending decisions. How you manage your student loan is reflected on your credit score; it’s vital if you want to acquire future credit and optimum terms.

If you’ve defaulted on your student loan, it’s likely that your credit standing is already damaged. But you can make incremental improvements to it if you take the necessary steps to resolve your debt.

EdFund, like most credit information providers, can only provide updates to the information we report to the credit bureaus. By taking action now and continuing to resolve the debt, you can start down the track of cleaning up the negative marks and repairing the damage to your credit rating.

EdFund reports to the following credit bureaus—Equifax, Experian and Trans Union. For a free copy of your credit report, visit www.annualcreditreport.com; call 877.322.8228; or write to Annual Credit Report Request Service, P.O. Box 105283, Atlanta, GA 30348-5283.

Collection agencies
EdFund’s contracted collection agencies include:

NCO Financial Systems, Inc.
www.ncogroup.com
507 Prudential Road, Horsham PA 19044
1.800.220.2274

OSI
www.osioutsourcing.com
5626 Frantz Road, Dublin oh 43017
1.800.962.5191

Premiere Credit of North America, LLC
www.premierecredit.com
P.O. box 19309, Indianapolis in 46219
1.866.808.7175

Van Ru Credit
www.vanru.com
1350 e. Touhy Ave., Ste 300e, Des Plaines il 60018
1.800.468.2678

Borrower assistance
If your loan was guaranteed through EdFund, we can help you resolve a default. EdFund staff will help you get back on track by finding a repayment option that will work for you.

Call us toll free at 1.800.367.1589.

EDFUND
P.O. BOX 419045
Rancho Cordova, CA 95741-9045
Toll free 877.2EdFund
(877.233.3863)

www.edfund.org

EdFund and its associated graphic and EdWise are registered trademarks of EdFund. All other trademarks are the property of their respective owners. Text also provided by the U.S. Department of Education and used by permission. ©2006 EdFund. All rights reserved.

I-49 30k 7.2006

This report provides background information on Federal Family Education Loan (FFEL) program consolidation loans and discusses options for redesigning consolidation loans. Specifically, it provides background information on the FFEL program and on the role consolidation loans play within the program. It also examines recent concerns voiced over the cost of consolidation loans, and discusses the types of consolidation loan redesign options that are receiving some consideration within the context of the reauthorization of the Higher Education Act (HEA). In brief, the report finds the following:

• Consolidation loans were initially introduced to simplify loan repayment and offer borrowers relief in the form of extended repayment. As the consolidation loan interest rate formula has been modified by Congress, consolidation loans have evolved into a refinance benefit as well.
• The current consolidation loan interest rate formula affords borrowers the opportunity to secure a fixed rate equal to the weighted average of the rates in effect on underlying (variable rate) loans being consolidated rounded up to the nearest one eighth of 1%. In the recent low interest rate environment consolidation volume has grown dramatically as borrowers have sought to lock in as permanent the favorable rates currently in effect on their variable loans. This has enabled a large number of borrowers to secure a valuable refinance benefit.
• Borrowers who lock in fixed rates through consolidation in other periods, however, can miss out on more advantageous variable rates that they would have had on underlying loans. This raises concerns with regard to those using consolidation for repayment relief who may need to consolidate in years in which the available fixed rate is high and thus disadvantageous.
• It is generally acknowledged that recent cohorts of low fixed rate consolidation loans will be costly to the federal government. This is because the government pays program lenders an interest subsidy designed to compensate lenders for the difference between the below market statutorily set rate charged to borrowers and fair market compensation on the loan. The rates being provided to borrowers on these consolidation loans, over time, are expected to be well below market rate.
• To gauge with precision the added subsidy cost associated with the consolidation refinance benefit it is necessary to look beyond the recent time period and assess comprehensively how the subsidy rates on cohorts of loans are affected by the refinance benefit.
• The central questions underlying the debate on the desirability of the existing consolidation loan rate structure seem to be: How favorable should the borrower interest rate be on a federally subsidized refinance benefit? Is the current rate structure well suited to accomplish policy aims?

Student Loan Consolidation Center Student Loan Trust I, a Delaware statutory trust (“SLCC”), today announced that it has commenced a tender offer to purchase some of its outstanding Auction Rate Student Loan Asset-Backed Notes, Senior Series 2002A and 2002-2A, for aggregate cash consideration not to exceed $26,000,000.

The offer expires at 11:59 p.m. (Eastern Time) on February 27, 2009, unless it is extended or earlier terminated. Tenders of the auction rate notes may be made at any time prior to the expiration of the tender offer.

Validly tendered auction rate notes will be accepted for payment subject to, and at prices determined pursuant to an auction process. Under the auction process, each registered owner of auction rate notes desiring to tender any of its auction rate notes must, prior to the expiration of the tender offer, specify the price or prices (in integral multiples of $100), for each $50,000 principal amount of auction rate notes, at which such owner is willing to sell its auction rate notes to SLCC and the aggregate principal amount of auction rate notes (in integral multiples of $50,000) it is willing to sell at each such price. The price or prices specified must be not less than $30,000 (60% of the par value) (the “Minimum Price”) and not greater than $40,000 (80% of the par value). No auction rate notes will be purchased pursuant to the tender offer at a price less than the Minimum Price. However, valid tenders of auction rate notes that specify a price of less than the Minimum Price will be deemed to have specified the Minimum Price.

Promptly following the expiration of the tender offer, auction rate notes validly tendered at the lowest price will be accepted first and will continue to be accepted at the related price in ascending order of such prices. SLCC will only purchase the maximum principal amount of auction rate notes that may be accepted without causing the aggregate amount to be paid for such auction rate notes to exceed $26,000,000.

If validly tendered auction rate notes are accepted for payment in accordance with the auction process, SLCC will pay a total cash consideration for each $50,000 principal amount equal to the price at which such auction rate notes were accepted for payment plus accrued and unpaid interest thereon from the last applicable distribution date to, but not including, the settlement date, which is expected to be the third New York City business day following the expiration of the offer.

The terms and conditions of the offer are set forth in the offer to purchase for the auction rate notes, dated January 23, 2009. This press release is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of an offer to sell any of the auction rate notes. The offer may only be made pursuant to the terms of the offer to purchase. The offer to purchase contains important information that should be read carefully in its entirety before any decision is made to tender or not tender auction rate notes pursuant to the offer.

Student loan forgiveness and service payback programs provide financial incentives in exchange for a specific work commitment. Loan forgiveness programs repay a percentage of an employee’s student loan after service commences; service payback programs cover a portion of a student’s school costs in return for an agreement to work in a specific job for a specified period of time in the future. These programs have one or more of the following four goals: to provide financial assistance to students to help them with the costs of college, to entice individuals to choose a particular occupation or field of specialization, to entice individuals to work for a period of time in a certain job or underserved region, or to entice individuals to remain in a high need occupation, region or underserved facility. Several bills that would expand existing loan forgiveness or service payback programs or extend them to additional occupational groups have already been introduced in the 109th Congress; over 40 bills were introduced in the 108th Congress.

The first major federal loan forgiveness program, the National Defense Student Loan Program, was authorized by the National Defense Education Act in 1958. It was a loan forgiveness program for public school teachers. Loan forgiveness provisions currently applicable to Federal Family Education Loans and Direct Loans were adopted in the 1998 reauthorization of the Higher Education Act of 1965, as amended (HEA). These provisions are for a teacher loan forgiveness program as well as a demonstration loan forgiveness program for childcare providers. Loan forgiveness is also available for Perkins Loans (low-interest loans made by institutions of higher education to students with financial need) for borrowers who work in specific public service jobs.

In addition to the U.S. Department of Education administered provisions, there are federal loan forgiveness and service payback programs specific to particular occupations or categories of borrowers, for example, the military and health professions. States also offer many loan forgiveness and service payback programs. A survey of 100 state programs in 2000-2001 indicated that 43 states had one or more of these programs. The majority of financial aid administrators interviewed about these programs for this survey reported that they were effective in meeting students’ financial needs and workforce needs. Nevertheless, concerns about the efficacy of these programs were also expressed by financial aid administrators.

In the 108th Congress, legislation was passed (P.L. 108-409, the Taxpayer- Teacher Protection Act of 2004), that will, among other things, temporarily expand student loan forgiveness to $17,500 for highly qualified special education teachers working in elementary and secondary schools, and for highly qualified mathematics and science teachers working in secondary schools. The expanded student loan forgiveness amount applies only to new borrowers on or after October 1, 1998, who borrow before October 1, 2005. As part of its reauthorization of the Higher Education Act, the 109th Congress will likely consider whether these new provisions should be made permanent.

You qualify if you can consolidate loans from the eligible loan programs listed below and you are in the grace period or in repayment for each loan to be consolidated. This process is called consolidation.

Here are the answers to the questions borrowers frequently ask about loan consolidation:

Why should I consolidate my education loans?
Consolidation makes repayment easier and can lower your monthly payment. You’ll be responsible for just one loan payment each month instead of a separate payment for each of your loans, you’ll deal with just one lender, and your repayment schedule will be extended. In the case of federal student loans, you can lock in the new low fixed rate.

Is there a downside to loan consolidation?
The interest rate on the consolidated loan may be higher than the rates of your other education loans. As a result of the higher interest rate and the longer repayment schedule, the total interest you’ll pay on the loan can be much greater than you would have paid without consolidating. Only you can decide if a lower monthly loan payment and the flexibility of dealing with just one lender offsets the increased finance charge.

Do I qualify for loan consolidation?
You qualify if you can consolidate loans from the eligible loan programs listed below (Stafford, PLUS, Perkins, HPSL) or other federal education loans and you are in the grace period or in repayment for each loan to be consolidated. Some lenders require you to consolidate a specified minimum amount of loans to qualify for their consolidation program.

Which types of loans can be consolidated?
Stafford (subsidized and unsubsidized); Federal Direct Stafford (subsidized and unsubsidized); Parent Loan for Undergraduate Students (PLUS); Federal Direct PLUS; SLS (ALAS); Perkins (NDSL); Health Profession Student Loans (HPSL); Loans for Disadvantaged Students (LDS); Nursing Student Loans (NSL); Federal Consolidation Loans; and Federal Direct Consolidation Loans. Although other education loans such as Law Access Loans cannot be consolidated, the amount of those loans will be considered in calculating the length of repayment on the consolidated loan.

What is the interest rate?
The interest rate is fixed and is based on a weighted average of the rates on the loans being consolidated, rounded up to the nearest 1/8 of one percent. The rate cannot exceed 8.25 percent. You will pay more interest for a long-term loan.

Are there any fees or charges?
There are no origination fees, service charges, or prepayment penalties.

When may I consolidate my loans?
Any time during your grace or repayment period. If you want to take advantage of your grace period, submit your application no earlier than four months into the grace period for the loans you want to consolidate. You may also consolidate your loans while still in school if you are attending at least half-time and have at least $5,000 in loans. However, if you do so, you will forfeit the in-school subsidy on the loan interest and you will lose the six-month grace period you would have had before the loans go into repayment. The loans will officially be in repayment status, even though repayment will be deferred while you are in school.

Did you know the interest rate on variable rate Stafford loans is at an all-time low? By taking this opportunity to consolidate, you can reduce your monthly payment and guarantee a fixed interest rate lower than the maximum rate of 8.25%.

Benefits of Student Loan Consolidation

• Fixed interest rates as low as 4.75%
• One low monthly payment
• No fees or credit checks
• No prepayment penalty
• Flexible repayment terms

Be prepared
You may be the target of marketing efforts by many student loan consolidation companies. Unfortunately, not all companies offering consolidation are credible. Some may inaccurately portray themselves as the only lenders to offer consolidation loans or make promises that seem too good to be true. Therefore, it is a good idea to research the lender you choose to consolidate your student loans.

Help from our financial aid office
To help you lock in these low consolidation rates, our financial aid office has prepared a list of some reputable consolidation lenders, allowing you to compare which lender programs offer you the best terms and greatest savings. Our financial aid office is familiar with these lenders as they all have many years of experience in the student loan industry and make loans to some of our students.

How to choose the best lender for consolidation
Because some lenders offer unique consolidation benefits, choosing one lender may save you hundreds, or even thousands, of dollars in interest over the life of your loan (depending on the loan amount you consolidate). The following lender list is to be used as an initial guide to compare benefits offered by the different lenders. Benefits may change, or there may be certain restrictions that apply. Before making a final lender choice, contact the lender by phone or online to receive detailed benefit information.

Federal Student Loan Consolidations were previously available through FFELP Lenders (banks, credit unions and other lending institutions) as well as through the federal government in the form of a Federal Direct Consolidation Loan. Recent legislative cuts made by Congress have resulted in federal student loan consolidation becoming uneconomical. This, combined with the credit market deterioration, has caused virtually all FFELP Lenders to suspend participation in the federal consolidation loan program. Therefore, students wishing to consolidate their education loans will need to consolidate through the Federal Direct Consolidation Loan Program.

To qualify for a Direct Consolidation Loan, borrowers must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment or default status. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan. Therefore, if you are currently in school, consolidation is not something that you can pursue at this time.

When you graduate or are no longer enrolled at least half time, you may wish to consider whether consolidation is right for you. To help you make that decision, please visit the Direct Consolidation Loan website (http://loanconsolidation.ed.gov/ ). There you can learn more about Direct Consolidation Loans, including questions to ask to determine if a consolidation loan is right for you, the specific eligibility criteria the loan terms and interest rate calculation. You can also contact the Direct Loan Consolidation Information Center at 1-800-557-7392.

Please feel free to contact the Financial Aid Office if you have any questions regarding the above information.