Student Loan Consolidation

I know nothing about it, but I get regular junk mail from loan consolidation companies and some people have mentioned it’s a good idea. I try not to think about my debts too much because they’re unspeakably large (six figures :eek:), but I should stop burying my head in the sand. Will I get lower interest rates if I consolidate?

That was supposed to be a :eek: - definitely not a :slight_smile: .

You have to run the calculations in order to determine whether or not it’s worth it for you to consolidate. has a number of useful financial calculators, including one entitled “Should I consolidate my debts?

I consolidated undergrad and grad loans through the Dept. of Education’s program, and it’s made my life immeasureably simpler. I don’t know about the rates or terms for private consolidation, but the federal program has all the same deferments and forbearances (severe illness, uemployment, etc.) as the original federal loans, a better interest rate, and extremely helpful customer service people. Plus you can now pay online, either by setting up a payment schedule in advance, or manually on a month-to-month basis. I love it! Plus they saved my butt when I was out of work after surgery and had a ton of medical expenses not covered by insurance.

I consolidated my loans through…agh, some company. I forget what they were called. It was a private company, though, and I cut my payments by about $90 a month. Serious savings for a poor chica like me. My rate went from 6% (I think) to 4%, with a promise to drop another point if I make all my payments for two years on time.

It depends. Most folks right out of school are concerned with getting the most affordable (lowest) monthly payment. Consolidation, generally, will get you the lowest monthly payment, but over a longer term such that you wind up paying more interest. If you can afford the higher monthly payments of keeping separate loans, you will most likely save money vs. consolidation.

Your mileage may vary.

True, IF you take the longest possible repayment term offered to you. However, I was given a multitude of repayment options, ranging from graduated repayment (which starts you off with a low payment, then increases it at 2-year intervals, as presumably your earnings also increase) to income-contingent repayment to stadard uniform payments, each with terms ranging from 10-year to 30-year repayment schedules. You can also switch back and forth between repayment plans if your circumstances change, or even if you just feel like it. So you can start off with a low payment when you’re fresh out of school and broke, and pay more as you’re able (IF you have the discipline to do that!)

Consolidation makes it much easier to keep track of when you did what, as it’s a single lender and a single payment you’re dealing with. If I hadn’t consolidated my loan, I would have needed to request a forbearance from about 15 different people when I needed a few months to catch up after my leg surgery.

Isn’t the main point of loan consolidation to lock in a low interest rate? I didn’t think it was in order to lower monthly payments.

I couldn’t figure out how to use that calculator, cynic. I guess I’m pretty clueless about these things. I’m not even sure who I owe the money to, or any other details about my loans. I think I have about a dozen separate loans. Consolidation sounds appealing for that reason alone.

It sounds like the answer to my question depends a lot on my particular circumstances. In my case, I am counting on my school’s loan repayment assistance program, because I will not be in a financial position to repay all this money. I’m thinking I may want a shorter repayment schedule because the loan repayment program only lasts for 10 years, and I’d like to get as much out of them as possible. I guess I better gather together my papers and head to the financial aid office.

Thanks everyone.

My original loan terms had me paying off my loans in 17 years. I consolidated after I’d been out of school for a year and a half, and my new term is 15 years. So that’s pretty close. Of course, I was living rent-free with my parents for the first year of that, so I could afford to overpay big time, which has helped. YMMV, but I’m pretty sure I’m saving money over the long term by consolidating.

There are probably a zillion ways to consolidate your loans, but if you consolidate multiple ten year loans into one twenty year loan at the same interest rate or higher, you will pay more money out of pocket and more interest, but your monthly payment will be lower.

IMH experience, that is a big reason why most people consolidate, to get a more affordable payment. Of course, there are other good reasons to consolidate as well: one monthly payment, often electronic, one point of contact–greater overall convenience and others too numerous to list.

If, on the other hand, you combine loans and SHORTEN the term of the loan at the same or a lower interest rate, your monthly payment will be higher but you will pay less interest and less out of pocket.

The only way to consolidate to get a lower monthly payment AND lower total payout would be to consolidate for a longer term and a lower interest rate which sounds impossible but in these days of low interest loans, especially refinancing Federally Guranteed student loans, it seems almost anythings possible.

Your mileage may vary. It all depends on the terms you get.