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<p>Good for you. Lender has a big profit if the loans exceeded the target rate of 6.5 and 8.5%
(1.7 % for Staffords and 2.3% on PLUS). If the loans fell below the target, the Taxpayer subsidized the loan to the targets. </p>
<p>So how did the 2% consolidation came about: The I rate is the weighted average of the loans being consolidated, plus a margin (I forget what it was). Resulting Consolidated Stafford/PLUS was actually a bit more than 3%, which is now 2%. The consolidator lender gives 0.25% discount for auto pay, and ~1% discount for ontime payments for 4-5 years. Borrower gets a “pickatime payment schedule” which included a straight line scheduled 10,15,20,25years with no prepayment penalty, a couple of graduated payments, Income Based (IBR). </p>
<p>The lender is more than happy to give discounts and to encourage a longer payoff. Something like 70% of borrows miss the 1st payment, and 90%+ miss a payment within the trial period. </p>
<p>JA is needs to be thinking on a paying at least the carrying interest, since the later two payment options have the interest capitalized.</p>