UHEAA Suspends Consolidation Loan Origination

Utah Higher Education Assistance Authority recently announced it will be indefinitely suspending origination of Consolidation Loans.  This will be effective for applications received on or after September 1, 2008.  With the recent actions by Congress to reduce lender yield on student loans and the current turmoil in the financial markets, UHEAA is unable to cover the costs of originating, holding, and servicing new loans under the Consolidation Loan Program.  In this time of tight credit, UHEAA must use its limited capital to originate loans for students currently enrolled in school rather than students who have already left school.  Instead of loan consolidation, UHEAA offers an Extended Repayment Plan that offers many advantages in comparison to loan consolidation. 

UHEAA has originated Consolidation Loans since inception of the program in 1988.  The original intention for consolidation loans was to offer borrowers with high balance loans the ability to make smaller monthly payments over an extended repayment period.  More recently, when interest rates were at historic lows, the program was used by borrowers to convert their variable rate loans to one with a fixed rate.  All Stafford Loans are now issued with a fixed rate, eliminating the incentive to consolidate student loan debt, except for borrowers who have obtained loans from multiple lenders.  Borrowers who may still desire to consolidate their loans will be referred to the Federal Direct Consolidation Loan Program.

Any questions related to this Bulletin should be directed to UHEAA Policy and Training at 801.321.7166, or by e-mail to mjohnson@utahsbr.edu.

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