Student Loan Consolidation

[beef41]

Question to people who know:

I have recently graduated from college (December 04). I have ~$20k of debt that is through American Education Services, {a division of PHEAA, Pennsylvania Higher Education Assistance Agency}. The current loan rate is 4.170% {but I am pretty sure this is a varriable rate}, my monthly payment is ~$250. I am trying to pay off this loan faster than the 6 bazillion months that it is spread out over, so I pay $300 or more as I can every month. {I have other loans, but none significant to this discussion... I think.}

Anyway, I keep getting letters in the mail for loan consolidation. I was tearing them up... But then I saw an article in the paper that said that students should consolidate now, and lock in the low rates, because rates are going to rise. The article mentioned that rates are often available at the mid 2% range. They also mentioned better rates for recent grads, and/or direct electronic deduction.

Should I consolidate? I want to be able to pay more than the minimum payment each month, but also be able to pay the minimum if money is tight one or two months. I'd like a shorter rather than longer loan term. I don't want to deal with an evil company, or one that may go bankrupt and demand the entire loan payoff immediatly. I kinda like the system I have now, but I don't want to be throwing away money.

What say ye?

If I consolidate, any recomendations on how to find a reputable and customer friendly company?

Thanks in advance!

[Delsocfan]

If you only have the one loan, I don't believe there is anything to consolidate.

[erikl2]

Question to people who know:

I have recently graduated from college (December 04). I have ~$20k of debt that is through American Education Services, {a division of PHEAA, Pennsylvania Higher Education Assistance Agency}. The current loan rate is 4.170% {but I am pretty sure this is a varriable rate}, my monthly payment is ~$250. I am trying to pay off this loan faster than the 6 bazillion months that it is spread out over, so I pay $300 or more as I can every month. {I have other loans, but none significant to this discussion... I think.}

Anyway, I keep getting letters in the mail for loan consolidation. I was tearing them up... But then I saw an article in the paper that said that students should consolidate now, and lock in the low rates, because rates are going to rise. The article mentioned that rates are often available at the mid 2% range. They also mentioned better rates for recent grads, and/or direct electronic deduction.

Should I consolidate? I want to be able to pay more than the minimum payment each month, but also be able to pay the minimum if money is tight one or two months. I'd like a shorter rather than longer loan term. I don't want to deal with an evil company, or one that may go bankrupt and demand the entire loan payoff immediatly. I kinda like the system I have now, but I don't want to be throwing away money.

What say ye?

If I consolidate, any recomendations on how to find a reputable and customer friendly company?

Thanks in advance!

By all means consolidate. Standard student loans are variable rate. So, it would be good to lock in a low rate now. I don't know what is currently being offered, but it may be better than 4.17%. I consolidated about a year ago for a little of 3%.

As you have experienced, there are a ton of options to consolidate, from government (Sallie Mae) to private (a lot of what you are getting in the mail). Just make sure that whatever you choose doesn't require fees to consolidate, doesn't have prepayment penalties, and has a fixed interest rate.

[Greywacke]

Since it appears that you have your loan(s) through a single lender/agency, I believe you can only consolidate with them (or at least have to give them the first crack at it). Give them a call and see what your options are.

But you should consolidate ASAP for a couple of reasons, IMHO:

1) The rates for most variable rate student loans (e.g. Stafford) are indexed off the 91-Day T-Bill rate set on July 1st and are variable on an annual basis. I believe the current 91 Day T-Bill rates are about 2% higher now than they were on July 1, 2004. Thus, unless something unforseen happens between now and July 1, 2005, a new higher rate will go into effect on that date. If you consolidate now, you'll lock in the lower rate for the rest of the life of your loan.

2) If any portions of your loan are still in the grace period (usually the first six months your are out of school when you are not obligated to make payments), you get something on the order of a 0.5-1.0% discount on the interest rate. You can lock in this extra-discouted rate for the rest of the life your loan by consolidating during this time period.

I think I have this right, but I welcome further clarifcation/correction from others. Good luck!

[erikl2]

Since it appears that you have your loan(s) through a single lender/agency, I believe you can only consolidate with them (or at least have to give them the first crack at it). Give them a call and see what your options are.


Actually, you don't have to give them the first crack at consolidation. You may go with any lender or agency, but you can only consolidate once.

I would personally recommend Sallie Mae. They really are the industry.

[quarterUltra]

Consolidate! And do it before July 1st. You'll get 4 points or so much better than I did. Now is the time. I consolidated when interest rates were higher.

It's my understanding that I can't reconsolidate. That it can only be done 1x ever. Is this true? I'm paying 7%, I think, maybe a little more. And I can only afford to make the interest payments, barely.

[erikl2]

Saw this in the paper today:

http://www.washingtonpost.com/wp-dyn/content/article/2005/05/25/AR2005052502046.html

[obie]

The only thing I'll say is that you have to thoroughly read the consolidation offers, since most stretch the payment schedule out beyond the standard ten years. They'll show you a lower monthly payment schedule but they don't tell you that they're adding another 60 payments to that schedule as well.

Definitely shop around and check to see your total estimated interest cost both pre- and post-consolidation before doing it.

[Quango]

Consolidate! And do it before July 1st. You'll get 4 points or so much better than I did. Now is the time. I consolidated when interest rates were higher.

It's my understanding that I can't reconsolidate. That it can only be done 1x ever. Is this true? I'm paying 7%, I think, maybe a little more. And I can only afford to make the interest payments, barely.

I was able to reconsolidate when I added another year of school to my loans. They averaged out the interest rate, I think. Q

[erikl2]

The only thing I'll say is that you have to thoroughly read the consolidation offers, since most stretch the payment schedule out beyond the standard ten years. They'll show you a lower monthly payment schedule but they don't tell you that they're adding another 60 payments to that schedule as well.

Definitely shop around and check to see your total estimated interest cost both pre- and post-consolidation before doing it.

Is this really a problem? As long as there are no prepayment penalties, you can always add additional principal. If you lose your job you have the added benefit of being able to have a "lowered" loan payment plan without any penalties.

[obie]

Is this really a problem? As long as there are no prepayment penalties, you can always add additional principal. If you lose your job you have the added benefit of being able to have a "lowered" loan payment plan without any penalties.
You have a very good point -- you can always pay more than the reg monthly payment. Much of the appeal of this to the consolidators is that they know that most people won't pay beyond their monthly amt, which makes the total amount in interest paid higher over the life of the loan.

[nicephoras]

30 year consolidation at a ridiculously low rate is a wonderful thing. If you can't make more than 2% in a mutual fund with the money you'd otherwise be paying to the lender, you don't deserve to have that money in the first place. Its a loan at a really low fixed interest rate. Why would you prepay it?