Loan Consolidation Worth It? Forum

[horns12]

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[20130312]

Depends.

If you've been through more than a year of school, you likely have a bucket of loans with different rates. Without consolidation, you can choose to put additional income toward the loans with the highest rates and thus pay less in interest over the long run. If we are talking about the type of loan consolidation where you also extend the term of the loans (from 10 year repayment to 25, for example), then you would obviously save money on interest by not consolidating and just paying them off within ten years if possible.

However, .5% from consolidation is nothing to sneeze at. If your bucket of loans doesn't have a wide variation in rates (i.e. less than or equal to .5%), then consolidation is easily TCR. Even if it extends the term of your loans, you can still choose to pay above and beyond your monthly payment in order to get them paid off within 10 years. Just make sure that there are no prepayment penalties before you do this.

[horns12]

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[20130312]

Thanks for the quick response! I've actually just graduated and have loans ranging from 6.8% Subsidized Stafford to 7.9% or 8.1% Grad PLUS Loans. The plan is to pay the minimum on the Stafford Loans while throwing as much as possible on the Grad PLUS. I hope to pay off everything in no more than 5 years, so I don't think I would benefit from a consolidation. Does this seem fair?

Yep, you definitely seem to have your head on straight. That's your best bet.

[horns12]

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[dingbat]

Call me cynical, but there has to be a catch to the 0.5% reduction in interest rate through consolidation, right? Admittedly, I haven't crunched the numbers, but it seems like paying off the loans with high interest rates (Grad Plus) fairly quickly could make consolidation more expensive. Does anyone have any advice for scenarios where consolidation would and wouldn't be financially beneficial with the 0.5% reduction in the consolidated rate? Thanks for your help!!

Speaking very roughly, if you plan on paying more than the minimum there are two reasons not to consolidate:
1) you can pay more on your high interest rate loans and thereby reducing your total interest payment over time
2) even if all loans are at the same rate, you can load all the extra payments on one loan, paying that one off first and reducing your monthly minimum payment

However, you should consolidate if:
you intend to only pay the minimum (lower interest rate)
You plan on using IBR/LRAP/PSLF (I'm not sure about this as I'm not familiar with those programs)

[dingbat]

Scooped because I had to work...

[20130312]

EDIT: I suppose it is necessary to know that about 1/3 of my loans are at the higher 7.9% or 8.1% level while the rest are at 6.8%.

Actually, now that I'm thinking about it...

Assuming 1/3 @ 8% and 2/3 @ 6.8%, your average interest rate is 7.2%. If the consolidation uses your average loan rate and then reduces THAT by .5%, it would actually bring you rate across the loans down to 6.7%, lower than even your Subsidized rate was to begin with. You should find out more about the method they use to determine your interest rate on the consolidated loan.

[20130312]

Scooped because I had to work...

Yeah I'm supposed to be doing that too... whoops.

[riccardo426]

Which lenders are you looking at? I am pretty sure I want to consolidate but I am not sure who is the best and what I should be looking for beside no prepayment penalty. I just graduated and have about 150k in loans, with 80 being grad plus. Getting a .5 reduction would be gold. Though automatic debit which I am going to do is already .25 reduction.

[jurisx]

Does consolidation include GradPlus and private loans, or is it only stafford loans?

Anyway I could toss in my "student credit card" debt into the mix?

[20130312]

Does consolidation include GradPlus and private loans, or is it only stafford loans?

Anyway I could toss in my "student credit card" debt into the mix?

Your federal loans can only be consolidated with other federal loans. For private loans, some companies may allow you to add in your credit card debt as well. But federal and private loans are always kept separate for consolidation purposes.

[jurisx]

Does consolidation include GradPlus and private loans, or is it only stafford loans?

Anyway I could toss in my "student credit card" debt into the mix?

Your federal loans can only be consolidated with other federal loans. For private loans, some companies may allow you to add in your credit card debt as well. But federal and private loans are always kept separate for consolidation purposes.

Are GradPlus all considered "private" then, even if from Direct Lending?

[20130312]

Does consolidation include GradPlus and private loans, or is it only stafford loans?

Anyway I could toss in my "student credit card" debt into the mix?

Your federal loans can only be consolidated with other federal loans. For private loans, some companies may allow you to add in your credit card debt as well. But federal and private loans are always kept separate for consolidation purposes.

Are GradPlus all considered "private" then, even if from Direct Lending?

No, GradPlus can only be consolidated with other federal loans.

[jurisx]

Does consolidation include GradPlus and private loans, or is it only stafford loans?

Anyway I could toss in my "student credit card" debt into the mix?

Your federal loans can only be consolidated with other federal loans. For private loans, some companies may allow you to add in your credit card debt as well. But federal and private loans are always kept separate for consolidation purposes.

Are GradPlus all considered "private" then, even if from Direct Lending?

No, GradPlus can only be consolidated with other federal loans.

Is that an actual law or just a general company policy?

[20130312]

Is that an actual law or just a general company policy?

It's federal law.

[jurisx]

Is that an actual law or just a general company policy?

It's federal law.

I don't care if it's been the law longer than I've been alive (assumption here) I BLAME OBAMA!!!!!!!!!!!!!!!!!

Good info to know though. Good to see this forum do something of real value every now and then.

[bloobook]

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[jurisx]

It's been the law for longer than Obama has been president.

I know, making fun of those who blame the current Prez (regardless of who in office) for what happened before he came in (even if decades old)


Don't believe it? Watch Fox News.

[jurisx]

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And you erased such a bland comment why? (especially since you were already quoted on it)?

Just an example on why to quote people before responding I guess there kids.