PHOENIX, Aug. 30 (UPI) -- Executives at Phoenix-based loan consolidator NextStudent have accused money lenders of slowing the consolidation process to charge higher interest rates.
NextStudent has accused lenders including Wells Fargo, Wachovia and Sallie Mae of violating federal regulations and obstructing students who attempted to consolidate loans before higher interest rates took effect July 1, The New York Times reported Wednesday.
"They're dragging out the period of time," said John Wallace, executive vice president of NextStudent. "They're hoping that you'll go away, that they can keep the loan on their books, and that you'll stop asking for it."
Wallace said the companies were obstructing the process in part because of a Congress-approved increase in the maximum interest rate that can be charged on a student loan, from 5.30 percent to 7.14 percent. However, Congress also changed a rule that required students who borrowed from only one lender to consolidate with that lender, allowing borrowers to switch financial institutions.
However, Wallace said companies were deliberately slowing the process of changing institutions. He said the company has taken its complaint to the federal Education Department.
