I’m in my last semester of my Master’s degree. I have student loans from my BA and my MA. I’ve been getting letters from various agencies about consolidating my student loan debts. Should I take them up on their offers? What should I look for and what should I beware of? Any advice here?
I realise that I’m only asking for advice from friends. But if someone with experience could speak up, I’d appreciate it.
I know a little bit, but I’m interested in hearing from an expert too.
My understanding with consolidation of loans is that you get a lower rate, but you lose a lot of the protections that Federal student loans give you, like putting off payments if you go back to school again or if you’re out of work. You have to decide how much those protections are worth to you and consider how much you’ll save over the life of the loan with consolidation.
The other thing I know is never ever ever consolidate student loans together with a significant other. If (God forbid) one of you were to die, the other would then be responsible for paying back the loans. Paying Sallie Mae $100 a month is not the way you want to remember a lost love.
I finished school two years ago and I was in the same situation you are. Federal loans paid for both my undergraduate and graduate schooling so I had over a dozen individual loans. So not only did consolidation offer a lower interest rate, it allows for one payment to one lender.
My loan is held by Sallie Mae, big surprise, and they do offer a very low rate. My payment is enormous, but so is my loan, so that is unavoidable if I hope to pay this off before I retire.
I do have the option to defer if I become unemployed or return to school. I do not know if there would be a penalty where my interest rate is concerned; I have not looked into it; but it is comforting to know that I have that option.
You have a 6 month grace period after you graduate, I am sure you are aware if you are already looking into this. No one contacted me at all any time during that period. I actually forgot until the last month that the repayment was coming up. I had no idea what to do about my loans and I was nervous about default, so I went to the Sallie Mae site because I knew they held my loans (they bought the loans from my previous lender). They offered a very good rate, so I consolidated with them.
It is a very good idea do look into actually consolidating before your repayment begins. In the case of Sallie Mae, they offered a lower interest rate as incentive if I consolidated early as opposed to waiting until after I began repayment.
I consolidated all my student loans a few years after college. The only down side is that once you consolidate, you can’t consolidate again unless you add more loans.
So, I was financed years ago at 8%, but now it’s down to 4% (or something like that) but I can’t reconsolidate to take advantage of the lower rate.
All of my Stafford loans were serviced by the same provider (Great Lakes). I don’t know if it was a Federal rule or a Great Lakes one, but I had to apply for consolidation with the same lender (in my case, Citibank) before trying any other lenders. Here’s what my lender says about deferment:
So it looks like you can defer the portion of your Stafford loan that is subsidized, but you still have to make payments on the unsubsidized loan.
I graduated in May of 2003 and consolidated last summer. My rate is 3.75%, but I would’ve been eligible for a lower rate if I had consolidated during my grace period. I had around $18,000 in loans and my payment dropped about $50 (it helped that I only had to write one check a month, or my initial payments would’ve been much higher). The term got reset to 10 years (instead of staying at 9 and change).
I’ve consolidated twice: once with my undergraduate loans (and I finished in 1995, so they were around 8%), and again this past fall with my grad school loans, and I was able to include my undergraduate loans in the second consolidation. The rate on my graduate school loans went up a bit, but the undergraduate came way down I think the overall rate is now around 4%, but I’d have to pull out the paperwork to see. It’s also a fixed interest rate instead of a variable one, which means that I’ve locked in those rates.
It does help having only the one payment to make, instead of a bunch to different lenders. I was also able to pull my grad school loans (except for one $4000 external loan) out of Sallie Mae. I went with Nelnet - that’s who I did the consolidation of my undergradute loans with, and I’ve been very happy with them. I went with online billing and automatic payments - which keeps the payments in on time, and that’s good because after 36 on time payments I get another quarter or half percentage reduction in my interest rate (again, I’d have to pull out the documentation to verify the actual amount).
There are a lot of companies out there that do consolidation loans, and if you have a choice (if all your loans aren’t through one company), take a look at what’s around.
Yup, pretty much what the others have said. You must ask your current lender first–only if they deny your request are you able to “shop around” for a different lender for consolidation. If you’ve borrowed from more than one lender over the years, pick one to start with and ask if they would be willing to buy the remainder of your loans from the other lender(s). If you do end up shopping around, things to ask about include interest rate deductions for EFT payments, rate reductions for XX number of payments on time, how often is interest compounded. Also check out their website. Does it seem to be user-friendly? In this day and age you will likely do the majority of your student loan management online so you don’t want to deal with a frustrating website for the life of your loan.
It is better to consolidate before your 6 month grace period ends; your interest rate will be lower. And ditto about consolidating with a spouse. Just not a good idea.
[Your Financial Aid Officer o’the Day]
I consolidated as well a cople years after graduating. As has been mentioned above, don’t consolidate with your spouse. Also, which I haven’t seen mentioned, is that the interest is still subject to tax deductions on your federal 1040.
Thanks for the replies, everyone, it helps a bit!
I’m in California and am going to get hitched to my partner this coming June, but given that we both have student loans, I’m wondering if it’d be wise to go thru the civil ceremony … the new Calif. law would make us responsible for each other’s loans should anything happen… not a good thing.
One caveat though: the interest rate for student loans is pegged to one or another of the federal interest rates, and is calibrated each summer for an entire 12 month cycle.
Interest rates have already risen since last summer, when they were at the lowest point they’ve ever been in the history of federal student loans. I’ve heard a few consumer advocates and financial advisors (Dave Ramsey, Clark Howard) advise people to consolidate now, because rates will never be this low again.