The problem of the single lender rule

by gamit gamit

What is the single lender rule? Well, according to the single lender rule, if you are a student

and you ask for a student loan, your request is sent through to the Department of Education which will decide who your lender will be. This action leaves you with very few options. Students are often stuck with one lender, due to the single lender rule, a rule that has many disadvantages.

At first sight it may seem like a good idea to have only one lender to hold all of your student loans, but there’s more to the single lender rule than it appears. First of all, according to the single lender rule you are forced to consolidate with one lender, the one that holds all your education loans, and this could cost you a lot of extra money due to the fact that you have no options regarding better interest rates and better fees.

Secondly, the single lender rule gives your lender the possibility to offer you poor services and uncompetitive rates. The lender is protected from competition as stated in the single lender rule. That means that according to the single lender rule you do not have the option to change you lender or to look for better services somewhere else. You may say ‘Ok. But I won’t go for a bad lender as my choice!’ Well, according to the single lender rule, it is not your choice to make. This choice is made by the Department of Education and this is even more unfair than the single lender rule itself. So, basically, due to the single lender rule you lose the right to choose from the variety of better rates and customer services offered by many student consolidation companies. These companies may have better alternatives like the so called “borrower benefits” which can lower your overall interest rate. Besides all the other disadvantages, the single lender rule prohibits student loan reconsolidation.

Good news would be that there’s an intense activity going on in order to repeal the single lender rule. This repeal of the single lender rule would give the students more options to choose from. It is only normal that students should have the opportunity to choose their lender, instead of being stuck with one lender that doesn’t fit their needs and expectations, as the single lender rule states. As a student, you have the right to appeal to your local senators, via e-mail or letters, in order to ask for a change or even repeal of the single lender rule. An alternative to the single lender rule would be the possibility for students to make a single lender list, from which to choose their lender. But, even in the case of the single lender list, one would have to be careful which lender he chooses. What should interest the student regarding the options of the single lender list is the lenders’ business reputation. Considering the fact that your lender is the one who will pay all of your debts, it is advisable that the lender you choose, from your single lender list, is a serious person (company) and pays your creditors on time. One thing you should search for, among the lenders in your single lender list, is complaints they had (if they had any) regarding fraud or bad business practice. Another thing you should analyze in your single lender list is the different rates and interest among the lenders. However many solutions may be for current problems students are stuck, for now, with the single lender rule and a lot of disadvantages. Although pressures have been made upon the Senate to repeal the single lender rule, nothing has been officially established so far. Perhaps in the future, a change in this area will be possible and students will be able to consider making a single lender list before choosing the lender who will take care of their loans.

Related Student Loan Resources

  • Student Assistance Foundation -
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Confronting with financial problems since college raises many problems and helps you deal with them. This is how you learn about how the system works, how your lender choices are limited with the single lender rule and how you should make a single lender list if times where better than they are now.

Reprinted with permission from