Would you ever NOT want to consolidate student loans?

[SquareOne]

Just graduated and hearing a lot of "consolidate your loans" talk from friends... Here are my current loans:

 

 

Federal Subsidized: $13,771 @ 3.610% and $9,229 @ 6.80%

 

Federal Unsubsidized: $17,478 @ 3.610% and $5,522 @ 6.80%

 

Federal Perkins Loan: $3,600 @ 5.0%

 

 

 

I'm interested in knowing drawbacks of consolidating, cuz there has to be some... New TL that affects average age/new acct. that drops scores? Looking to buy a car soon and need primo credit..

 

 

Also, would I be consolidating directly with the US Dept of Edu since I have all federal loans, or are they going to pawn me off to someone like Citi or another lender for the consolidation?

 

 

 

Thanks for any advice!

Edited November 19, 2008 by SquareOne

[LynnInMN]

Just graduated and hearing a lot of "consolidate your loans" talk from friends... Here are my current loans:

 

 

Federal Subsidized: $13,771 @ 3.610% and $9,229 @ 6.80%

 

Federal Unsubsidized: $17,478 @ 3.610% and $5,522 @ 6.80%

 

Federal Perkins Loan: $3,600 @ 5.0%

 

 

 

I'm interested in knowing drawbacks of consolidating, cuz there has to be some... New TL that affects average age/new acct. that drops scores? Looking to buy a car soon and need primo credit..

 

 

Also, would I be consolidating directly with the US Dept of Edu since I have all federal loans, or are they going to pawn me off to someone like Citi or another lender for the consolidation?

 

 

 

Thanks for any advice!

 

You apply to the consolidator of your choice....you have a Direct Loan so a Direct Loan Consolidation would be your loan of choice. They would not pawn you off to a FFELP lender.

 

I dont know of any reason why you wouldnt want to consolidate. It really simplifies to whole loan experience.

[baller4ever85]

only potential negative i can think of is that there is no grace period, so if you back to school you go back into repayment immediately.

Edited November 19, 2008 by baller4ever85

[Omari]

The only thing I would do is delay consolidation to (maybe) lock in a slightly lower rate on those variable interest direct loans. The interest rate fell alot between July 2007 and July 2008, and they have already fallen (but there isn't a guarantee) another 1.5%. If you can wait it out until June 2009, then you can look at the last auction in May and compare it with what you are paying now, and see which one is lesser. If the Jul 2008 rate ends up being lower, then you consolidate in June 2009 and keep that old rate. If the Jul 2009 will be lower, then you wait until July to consolidate.

 

That's the only reason I'd delay consolidation.

[Saria]

One should also think carefully before consolidating a Perkins. Some of the Perkins forgiveness provisions are lost if consolidated.

[trublu]

I consolidated my college loans a few weeks ago but today I think I might have made a mistake. For me my college loans were the oldest things on my credit. I just figured today that after consolidation the new date on those loans will be Nov 08 as the new consolidated loan. I'm not 100% sure on how this will affect me. I don't know if the old loans will drop off my credit since they are paid off as part of the consolidation process. Really worried about that cos my credit might tank cos I don't have anything else on my credit that's close to being that old.

[Saria]

I consolidated my college loans a few weeks ago but today I think I might have made a mistake. For me my college loans were the oldest things on my credit. I just figured today that after consolidation the new date on those loans will be Nov 08 as the new consolidated loan. I'm not 100% sure on how this will affect me. I don't know if the old loans will drop off my credit since they are paid off as part of the consolidation process. Really worried about that cos my credit might tank cos I don't have anything else on my credit that's close to being that old.

 

Your old loans will report as paid and closed with a zero balance and will continue to report for years. Your consolidation loan will be a new TL. You should be fine, don't sweat it too much since you won't lose the age from your original loans for quite some time.

[trublu]

I consolidated my college loans a few weeks ago but today I think I might have made a mistake. For me my college loans were the oldest things on my credit. I just figured today that after consolidation the new date on those loans will be Nov 08 as the new consolidated loan. I'm not 100% sure on how this will affect me. I don't know if the old loans will drop off my credit since they are paid off as part of the consolidation process. Really worried about that cos my credit might tank cos I don't have anything else on my credit that's close to being that old.

 

Your old loans will report as paid and closed with a zero balance and will continue to report for years. Your consolidation loan will be a new TL. You should be fine, don't sweat it too much since you won't lose the age from your original loans for quite some time.

Whew! you just made my day. I have another question. One of the loans I consolidated is not showing up in my reports as a negative account. I was 60 days late when in 2006. Is this why? I don't understand why a paid off account = negative.

[krzywon]

I consolidated my college loans a few weeks ago but today I think I might have made a mistake. For me my college loans were the oldest things on my credit. I just figured today that after consolidation the new date on those loans will be Nov 08 as the new consolidated loan. I'm not 100% sure on how this will affect me. I don't know if the old loans will drop off my credit since they are paid off as part of the consolidation process. Really worried about that cos my credit might tank cos I don't have anything else on my credit that's close to being that old.

 

Your old loans will report as paid and closed with a zero balance and will continue to report for years. Your consolidation loan will be a new TL. You should be fine, don't sweat it too much since you won't lose the age from your original loans for quite some time.

Whew! you just made my day. I have another question. One of the loans I consolidated is not showing up in my reports as a negative account. I was 60 days late when in 2006. Is this why? I don't understand why a paid off account = negative.

The 60 day late is the negative, not the closure of the account. Since this is a Federal student loan, GW doesn't exist, so you'll have to wait for this to fall off in 5 years.

[martshap]

I can think of at least 2 additional reasons not to consolidate. I'd like to get feedback from others to see if they agree with me.

 

1) You may want to consolidate your lower rate loans, but not your higher rate loans. This is especially true if the higher rate loans are fixed (e.g. 6.8%). That way you can pay off the higher rate loans before the lower rate loans. The way I understand it, if you consolidate them all together they will all be lumped into one loan with one (weighted average) interest rate. That deprives you of the ability to pay down the higher rate loans first.

 

2) I believe Sallie Mae offers an interest-only repayment option for up to the first 4 years. If your goal is to keep payments at a minimum for now than the Saliie Mae option might result in a lower monthly payment than any of the Federal direct loan repayment plan options.

 

I welcome feedback. Please let me know if you all agree or disagree.

[mudnuri]

I consolidated to get into the graduated payment plan.

 

To me it was a no brainer, if I left them alone, I would be paying over $250 per month. By graduating I am paying 124 for the next 2 years, then it goes up etc... I will still pay then 200 per month and will pay it off earlier, but should something happen to my job (healthcare, its pretty stable) i can revert to my lower payments.

 

Brandy

[Estron]

I'm coming late to this party, but there is one thing the OP, or anyone else with older student loans, may want to consider.

 

In the mid-2000s, student loan lenders were offering incentives such as interest rate discounts. My employer had many loans on which the student's interest rate would be discounted 2 percent after 48 months of on-time payments.

 

In these days, no discounts are offered. So if you consolidate and thus pay off a loan on which you were about due for a nice interest rate cut, the new consolidation loan will not offer that incentive.

[LynnInMN]

I'm coming late to this party, but there is one thing the OP, or anyone else with older student loans, may want to consider.

 

In the mid-2000s, student loan lenders were offering incentives such as interest rate discounts. My employer had many loans on which the student's interest rate would be discounted 2 percent after 48 months of on-time payments.

 

In these days, no discounts are offered. So if you consolidate and thus pay off a loan on which you were about due for a nice interest rate cut, the new consolidation loan will not offer that incentive.

 

most of those perks have gone bye bye. The lenders were free to withdraw these perks at anytime.

[wildmn]

most of those perks have gone bye bye. The lenders were free to withdraw these perks at anytime.

 

I unfortunately have experienced this. A certain bank (think stagecoach) recently pulled that card. When I applied for the loans they were offering a rate reduction (either .5 of .75%) for automatic withdrawal from their checking account, which I had. The loan was not dispersed for another 2 months. Between those two dates, the bank decided to withdraw the offer. Now that I recently started repayment, I noticed and complained but because the loans were dispursed after that date I get no benefit...

 

I am considering consolidating that loan and the other stafford I have w/ a diff company but am unfamiliar with the process. Assuming I have fixed 6.8% (i think a small % is variable, but most is fixed), would that be my rate on a consolidated loan as well or would I benefit from the lower federal rates?