loan consolidation??

Question

i just graduated from a state school in pa a few weeks ago...ive been getting a lot in the mail about consolidating my student loans, does anyone know if this is a good idea? or is it just junk mail?

nope, not penn state...a school called slippery rock university of pa...which agencies did you folks use for the consolidation??

Answer 1

There advantages and disadvantages to student loan consolidation. At present, the biggest concern should be the Stafford Loan (and PLUS) interest rate increase that will take place on July 1, 2006. If you plan on consolidating at the lowest rate possible, you will need to apply before that date. If you do not, your Stafford interest rates will increase by almost 2%.

The biggest downside to consolidating is that you will lose your 6-month grace period (9 months for Perkins), so your first payment will probably be due within a month after you complete the application. You will, however, retain the ability to apply for deferments and forbearances. Even better, the subsidized portion of your Stafford loans will retain their interest subsidy (meaning that, even if you consolidate your Subsidized Stafford loans with other unsubsidized loans, the government will continue to pay interest on those Sub loans any time that you are in school or in-grace -- a great "perk" if you plan on going to Grad. school).

If you decide to go to graduate school, your consolidation loan will be eligible for an in-school deferment (just as your Stafford and/or Perkins loans would be if you didn't consolidate).

It gets a little complicated, I know. All things considered, if you think you can handle losing your grace period, consolidating is probably your best move. 2% in interest can really add up over 10-30 years.

Some examples:

Say you have $10,000 in Stafford Loans. Your current Stafford interest rate is 4.7% and will increase to 6.54% in July. Once your 6-month grace period is up, you will begin repayment and your rate will increase to 7.14% (and if you don't consolidate, your rate will continue to change every July 1st). Using 7.14% as a sample rate... $10,000 at 7.14%, over 10 years adds up to a monthly payment of $116 and an overall cost of $14,020

If you consolidate this month, you can "lock in" the current rate (4.7% rounded up to the nearest 1/8th of a percent equals a consolidation rate of 4.75%, sometimes lower). $10,000 at 4.75% over 15 years (you get longer to repay when you consolidate) will amount to a monthly payment of $78 and an overall cost of $14,001.

So, from a financial standpoint, you need to determine if these savings are worth losing your grace period.

Answer 2

First off, you won't have to pay on your loan until at minimum 6 months after graduation and you could even get it deferred beyond that if you simply ask for it. This is best for the time as no interest is accumulating on those loans at this time. However, once you do start repayment, consolidating them is generally a good idea. Obvioously you would want to check on the terms of the consolidation loans first to determine if the rate and term is equal or lower than your existing loans. But the consolidation does make it easier to take care of as there would be only 1 payment. Me personally, I would keep it deferred for as long as possible while saving money in an interest drawing account at the same time. Then once forced to go back into repayment, you can take the money out of the savings account that, you have been drawing interest on, and make a lump some payment towards the balance reducing the amount of principle onit and thus eliminating alot of interest that would have accrued on those loans.

Answer 3

The short answer is that in 99% of cases where the student loans are federal loans (as opposed to private loans), it IS a good idea to consolidate. Primarily this is because student loans have variable interest rates. The federal government sets the interest rate on student loans. The interest rate on student loans is tied to the interest rate on Treasury Bills. So when the Fed raises interest rates, the Treasury Bill interest rate goes up and so do the interest rates on your variable rate student loans. HOWEVER, when you consolidate your loan(s) you get a FIXED interest rate and you don't have to worry about the Fed raising interest rates.

You can consolidate a single loan to get the benefit of a fixed rate.

Unless you consolidate your variable interest rate student loans into a fixed rate loan, the interest rate on your student loans WILL go up as of July 1. So consolidate, and get a fixed rate, before the end of June!

It doesn't really matter where you consolidate your federal student loans because the government sets the interest rate. However, different loan consolidaters provide different services that might matter to you. For example, my consolidater offers a .5% interest rate reduction for automatic withdrawl, AND a 1% interest rate reduction after I paid on-time for 36 months.

Because individual customer service is important to me, I chose a consolidator where I could have my own case manager. He knows my name when I call. If I have a problem, HE fixes it and calls me back. I don't spend hours on the phone on hold or talking to call-center morons.

By the way, I had two loans with Sallie Mae. Sallie Mae bought two of my federal student loans while I was still in school. Sallie Mae would NOT let me consolidate to a fixed rate loan with anyone other than them. (This is illegal and Sallie Mae is being sued for the practice.) I did consolidate with them and paid that loan off FIRST and FAST. I HATE Sallie Mae. Horrible business practices. Horrible customer service. So my personal recommendation is consolidate with ANYONE BUT Sallie Mae.

Answer 4

A GREAT IDEA!!!! i consolidated my student loans just over a year ago. i went from paying nearly $400/month, down to $90/month. call a few of the offers you've been getting in the mail. don't jump in to the first deal. some agencies will have better offers than other.

by the way... congrats on your graduation.

Answer 5

Depending on what your loan amounts total it may be right for but I would look into all other options before consolidating your loans. Often times creditors will see you have consolidated your loans and mark your account negatively for it. You may be better off getting a personal loan and paying off the student loans and then just making one payment to one creditor. Good Luck

Answer 6

Consolidate, consolidate, consolidate. Not only will you be able to keep up with one loan as opposed to how many you received, you will have a consistent amount to pay. Go to Direct Loans -William H. Ford and get on the program where you pay back according to your income. It works for me!

Answer 7

Congrats on graduating. Did you come from Penn State? My boyfriend graduated from there. As for your question, you could combine your student loans to make 1 easy payment, but that usually extends the loan repayment term and therefore the interest rate might change. Good luck :)

Answer 8

If your student loan is with one company only, and you have a very low fixed rate of interest, I would stay put with that. Hoewever, if you have taken loans out with many loan companies, and they all charge a medium to high rate of interest, you may want to consider loan consolidation, where you only have one concern to pay. Be sure to pick one with the lowest interest rate you can find, and make sure it is a fixed rate.

Answer 9

Consolidation is a great deal - if the interest rate is right. If you can get one loan with a low interest rate vs many small loans with high interests rates, you cannot loose. I would defintely do it.

Answer 10

It is all about the fixed interest rate. The lower the better. Also, think about your monthly payment. You'll often have the option to pay differing amounts a month. The more you pay a month the cheaper you total loan is.