Discover Student Loans Review
You’ve probably heard of Discover because of their credit cards. Well, after the recession hit, they decided to jump into the student loan arena.
In December, 2010, they finalized the purchase of Citi-group’s Student Loan Corporation stake for around $600 million. They also acquired $4.2 billion in private student loans.
Pocket change, right?
Things were sailing smoothly until 2015 when they were slammed with a ruling to refund around $16 million to borrowers, and fined an additional $2.5 million by the Consumer Financial Protection Bureau.
Apparently Discover wasn’t playing fair with its borrowers. There were a few issues that cropped up over and over again. Bills were consistently “misprinted,” so the minimum payments due were incorrect. They also failed to send tax information to their borrowers, you know, the paperwork that allowed them to get the student loan interest deduction.
The tax issue was an interesting one for sure. The only borrowers effected were ones that originally applied for loans with Citi-group. Apparently, Discover required that they submit an extra form to get their interest statements. Without that form, their interest paid would show as $0.00.
Finally, Discover had some trouble making phone calls within the 8:00 a.m. and 9:00 p.m. window allotted to collections calls. They were popped with having to pay $92 for every customer they did this to at least five times, and $142 for every customer they called more than 25 times.
So what does this mean for borrowers?
Well, it should give you a little bit of hope. As a general rule, when big companies are hit with penalties like this one, they change things pretty quickly. Everything I’ve seen has shown this to be the case.
What does Discover offer to Potential Borrowers?
Let’s start with their interest rates on their new private student loans. Discover offers both variable and fixed interest rates. The variable rates range from 3.37% to 7.49%, while the fixed rates range from 5.99% to 9.49%. The repayment period on these loans is 20 years.
You can also rest assured that you won’t be paying any extra fees. Discover doesn’t charge any application fees, origination fees or late fees, or pre-payment penalties.
They also give borrowers a 0.25% interest rate reduction if they sign up for automatic payments.
However, the biggest benefit Discover gives to borrowers is their payment assistance programs. Discover offers programs for borrowers having issues making their payments on time:
· Deferment: Discover will temporarily postpone payments for borrowers that are enrolled in school at least half-time, active duty military, or serving with a public service organization or in a medical residency.
· Early Repayment Assistance: Discover will extend a borrower’s grace period by three months if they are in the first three months of repayment and their student loans are less than 60 days delinquent.
· Payment Extension: Discover gives borrowers a three month extension to come current, if they have delinquent loans more than 60 days late.
· Reduced Payment: Borrowers can pay interest only for six months, minimum of $50, if they are less than 60 days delinquent.
· Forbearance: Borrowers can postpone payment for up to nine months, if they are experiencing hardship due to unemployment, economic hardship, excessive student loans, or medical disability. If borrowers make six months of payments after the initial forbearance period has run, they can qualify for an additional 3 months of forbearance.
· Hardship: Finally, if a borrower is experiencing extreme economic hardship or an excessive student loan burden, she can have her minimum monthly payment reduced, subject to the $50 minimum requirement.
Discover Student Loans Eligibility Requirements
Discover is one of the few loan companies that has its requirements spelled out on its website. To qualify for a loan a borrower needs to meet the following criteria:
1. Must be a current Discover customer
2. Must have attended a school Discover does business with
3. Need to be a U.S. citizen or permanent resident
4. Need to be at least 18 years old at time of application
5. Need to have decent credit or a creditworthy cosigner (at least 680 FICO score)
6. Can’t have more than $150,000 in aggregate student debt
7. Need to be the primary borrower on the student loans they wish to consolidate
8. Need to have verifiable income sufficient to support currently owed debts plus a positive repayment history.
How to Apply for a Discover Student Loan
Applying for a loan is easy enough. You can do that on their website, and it takes about 15 minutes.
The application review process takes between 30 and 45 days. At the end of that time, you’ll either get a rejection letter or an approval disclosure. You have 30 days to accept the loan terms.
Like we said, Discover has one of the most generous payment assistance programs out there. It covers just about every scenario out there, and you will definitely have some peace of mind if you get your loan through Discover.
It’s hard to put a price on peace of mind.
On top of that, you’ll be working with a company that is putting some serious capital into making sure its lending practices are above and beyond what is required by the federal government, and they will bend over backwards to help out borrowers that have questions or issues.
They are currently paying the price for cutting corners with customer in the past, and I have a very difficult time imagining Discover wanting to go through that process all over again.
All in all, Discover is a relatively competitive company, with some pretty good perks. While the interest rate could be better, the company could be a lot worse.