Corporate bozos and the Single Lender Rule

First of all, I want to be clear that I like my local bankers. =) They're good people who have helped me out already a couple of times in ways you just can't get from a big city bank. The fact that the rest of this post is going to be critical of Wells Fargo Student Financial Services (WFSFS) has absolutely nothing at all to do with my friends downtown who happen to work for the same company.

That said, WFSFS just amazes me. They are the most unhelpful, unrepentantly greedy, uncompromisingly uncompetitive outfit I have ever dealt with. In the worst moments of dealing with them, the word "evil" has often sprung to mind, when I've been able to think straight at all.

You see, I'm caught in a beautiful loophole created for greedy banks like WFSFS by lawmakers who realize that most students don't vote (and don't make huge campaign contributions, even if they do vote), but that most bankers DO. This loophole is known as the Single Lender Rule, and it's one of the stinkiest pieces of manure to emerge out of Washington in recent memory. It's made my life miserable.

What the Single Lender Rule says is that if all of your federal student loans come from the same lender, then that lender can force you to consolidate with them, regardless of whether they offer competitive rates or not.

In other words, imagine all of your financial aid counselors have told you that you should take your loans from the same bank, because it will be easier when you graduate. When you graduate, you want to consolidate with someone who offers you discounts - most consolidators offer .25% just for letting them take the payment right out of your checking account electronically, and another 1.0% for making 36 straight on-time payments. But since you've got all your loans from a single bank, you'd better hope that they offer competitive discounts like this! Because if they don't, the two words that will be ringing in your ears are: TOO BAD. The bank doesn't have to let you consolidate with another lender, and they don't have to match anyone else's incentives.

Which means, when you've got as much in loans as I've got, that the "Wells Fargo Tax" for me will come to somewhere around $10,000-12,000 in extra interest over the life of the loan. That's a car I won't be able to buy, because Congress decided that banks like WFSFS should be protected from the need to be competitive.

Ah, but I've found an (exceptionally ridiculous) way around this situation.

You see, all I need is a single student loan from some bank other than WFSFS, and then I can consolidate with anyone I want. (Yes, the law really is that ludicrous.) "But Bob," you say, "you've already graduated. How are you going to get another student loan?" The simple, yet ridiculous answer: I'm going back to school in order to save $12,000.

I hadn't planned on going back for graduate studies in theology for several years, if at all, before this came up. I wanted to be paying off my loans, not adding to them, and I wasn't even sure I wanted to get a doctorate in the first place.

Well, I won't be going for a doctorate... you can't do that until you've been a pastor for at least three years. But there's no restriction on the Master of Theology degree (pastors have a Master of Divinity). I can enroll in that as soon as the spring semester.

So, the recap: WFSFS are uncompetitive (and potentially evil) bozos. My local bankers are not. Congress has decided to protect the bozos, which will cost me beaucoup bucks. The only way out of this is for me to go back to school long enough to get just one more loan.

The true beauty of WFSFS's bureacracy was revealed when I called them today to tell them I'd found a way out. Let's face it - I'd be much happier just consolidating with them at the fair rates, if they'd only negotiate. So I told them that the choice before them was to match the rates everyone else offered me, or to lose my loans entirely when I go back to school in a few months. WFSFS refused to budge, even then. They'd rather lose all my student loans, and all the interest they'll generate, than to give a fair rate on those loans. "Corporate bozos" really doesn't come close to describing this insane approach to business... but it's the best I could come up with and still be polite.

So, it'll be back to school part time for me once I put in the paperwork. If I'm going to take as many classes as this will take to qualify for a loan, I might as well finish up the degree; it's only six credits, and should cost somewhere around $7,000 to complete. Not counting the thesis, it shouldn't be too hard to finish the program in two or three years.

Well, it was good to finally air that dirty laundry. Even though it's a complete farce that I need to enroll in another degree program and take out more loans in order to get a fair rate on the loans I've already got, it won't be all bad. I need to take "continuing education" credits anyhow... this should certainly qualify, and I've got two weeks off from the church each year to take them, as well as $500 or so in my comp package to help pay for them. Getting an M.Th should increase my earning potential, and it's something that I'll enjoy having and working toward.

I just would never have guessed I'd be doing this so soon. Life in the world of Corporate Bozos and the Single Lender Rule is weird that way, though.