Who should I consolidate my student loans with?

I’ve got one loan with Direct Loans, and two with Sallie Mae.

Sallie Mae is offering the lower pre-July interest rates as long as I fill out their concierge consolidation form before tommorrow, even though I don’t have to actually submit my signed application untill August 1st, 2005.

As long as my Direct Loans consolidation application is postmarked by midnight tomorrow, I can still get the pre-July rates. They won’t give me untill August.

I asked the Sallie Mae Customer Service guy to try and sell me on why I should pick them, and he rambled on about a few things like payment flexibility and incentives to use electronic debit. The only question I could think to ask was whether or not they would allow domestic partners to consolidate, and he said no. I asked if he know of anyone who did so, and he said no.

I’m not even going to ask the Direct Loans folks that question, considering the current administration…

I’m not very savvy with regards to matters of finance (in case you can’t tell by my horrid level of procrastination) and I’m pretty much on the fence as to which of the two I should go with. My girlfriend and I are both currently split between the same two lenders, and we’re trying to decide which last minute wire to dive under. We have no plans of trying to consolidate together, it just seemed like a matter of principle that would help us off of the fence, but oh well, which leads me to the Teeming Millions.

I have always intended on consolidating with Direct Loans on the grounds that the government might be slighly less inclined to suck me dry compared to a private lender, but in the years that have passed since graduating, I’ve aquired enough wisdom to realize that I really haven’t a damn clue as to which is the lesser of two evils in this situation.


Confirm that one of the incentives to use electronic debit is a reduction in interest rate. My loans (with Sallie Mae and currently unconsolidated) have been reduced in interest a quarter percentage point because I pay automatically via an electronic debit each month. This means that instead of paying 3.5% in interest, for example, I pay only 3.25%. Over the life of the loan, that can amount to some real savings. If Sallie Mae offers that and Direct Loan doesn’t, I’d absolutely go with Sallie Mae.

One thing Sallie Mae also does for me (but again, my loans are not consolidated) is that after four years of on-time payments, they drop my interest rate another 2 percentage points. So, coupled with my quarter point reduction, I pay only 1.25% interest, instead of 3.5% interest. That also makes a big difference. Find out if they offer something similar for consolidated loans.

Other than that, I’ve been with Sallie Mae all throughout and have never had a problem. Their customer service people are generally helpful and pleasant.

It is a quarter percetage point incentive. I use electronic debit and have that deduction on the two loans I have with Sallie Mae currently.

Last July, I went with direct loans (I had loans all over the place. Of all the loan companies, they’d given me the least amount of trouble before consolidating).

There were quite a few problems at first trying to get things set up , but since those first six weeks, everything has been fine.

I also get the discount for automatic, electronic debit.

Check what kind of Sallie Mae loans you have, because the two I have from them couldn’t be consolidated with anyone else. I forget the type of loan…but regardless, I had to keep them with Sallie Mae and consolidated my Direct Loan with my loans from VSAC (Vermont Student Assistance Corp.) I also have electronic debit with them, and get a quarter point reduction.

I have just been fighting this battle. Things I have learned in the past month:

  1. It’s generally a bad idea to consolidate your loans together with those of your spouse/SO. Most student loans are voided in the case of the borrowers death or permanent disability. If you and your partner consolidate all your loans into one giant loan and something happens to one of you, the other is still responsible for the whole amount.

  2. Private loans (like those I have through Sallie Mae) cannot be consolidated through the government website. Check to see if your Sallie Mae loans are eligible for a federal consolidation loan or if you’re going to have to go through a private company.

  3. Different Sallie Mae phone-help types will tell you different things about the rules of consolidation. I had one person tell me that I could consolidate my private loans, no problem. Then another person told me that I needed to include a federal loan in order to be eligible for consolidation. Then a third told me that although they’re private loans, since they’re through Sallie Mae, they’ll consolidate them for me.

  4. If you consolidate loans through Sallie Mae you lose your 6 month grace period after graduation. If you are already in repayment this is not an issue for you.

  5. Based solely on the amount of junk mail I get there are far more loan consolidation companies than there really need to be.

I ended up consolidating my Direct loans through the Direct loan consolidation program and my Sallie Mae loans separately through Sallie Mae. I went for two separate consolidations partly because I couldn’t include my private loans in Direct loan consolidation and partly because my private loans have much higher interest rates and I didn’t want them pulling the rate up on my Direct loans.