Bank of North Dakota borrowers have federal student loans

Bank of North Dakota borrowers will have one less option for consolidating their federal student loans.

The bank announced Friday that it is suspending its Federal Consolidation Loan program due to federal legislation that raised fees for lenders.

The decision means borrowers with multiple federal loans – such as Stafford, Perkins, Health Education or Nursing loans – can no longer consolidate those into one payment through the Bank of North Dakota.

Julie Kubisiak, director of the student loan program, said the College Cost Reduction and Access Act of 2007 has made it difficult for the Bank of North Dakota and other lenders to continue the program.

“It just wasn’t economically feasible for us to stay in the program,” Kubisiak said.

The bank will continue to service all existing consolidated loans.

Borrowers can consolidate federal loans through the Federal Direct Loan program, and the Bank of North Dakota will advise borrowers about their options, Kubisiak said.

The bank also will work with borrowers who want to lower their payments or extend their repayment period, she said.

Harrison Wadsworth, a principal at Washington Partners LLC who has expertise in federal financial aid programs, said the decision by the Bank of North Dakota is typical in the industry.

“There are very few lenders that are still participating in the consolidation loans,” said Wadsworth, based in Washington.

A year ago, the market for consolidation loans was competitive with lenders offering discounts to borrowers, Wadsworth said.

“That vibrant market is gone,” he said. “It means that students’ choices in consolidation loans have been dramatically reduced.”

The Bank of North Dakota may reinstate the Federal Consolidation Loan program in the future, depending on the market, Kubisiak said.

Another change prompted by federal legislation is that students who attend college out of state will now have to pay fees on Federal Stafford loans.

The Bank of North Dakota previously paid a 1 percent origination fee and a 1 percent default fee for all Stafford loan borrowers, regardless of their residence or where they went to school, Kubisiak said.

The bank will continue paying the fees for students attending North Dakota institutions, but not for students who go out of state, she said.

The maximum impact to students will be $55 a year, Kubisiak said.

Jane Williams, financial aid director at Concordia College, said she doesn’t expect the change to have a big impact on students. About 3 percent of Concordia students had federal loans through the Bank of North Dakota last year.

“It’s really pretty minor, and it’s exactly the same thing other lenders have already done or we expect will do,” Williams said.

While cuts are having an impact on federal programs, the Bank of North Dakota is continuing and expanding a state program.

The bank will continue paying a 2 percent administrative fee for borrowers who take out a Dakota Education Alternative Loan who attend North Dakota institutions.

That fee waiver is being extended to North Dakota residents who attend out-of-state schools.

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