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Is student loan consolidation a good thing?

2Xtreme21

2Xtreme21

Diamond Member
The end of my student loan grace period is coming up this month and I think I have most of it figured out. For simplicity's sake I'm going to list them all (estimates) with their interest rates and providers:

AES
$4800 @ 6.8% F -- $55.29 for 10 years
$3300 @ 6.8% F -- $38.06 for 10 years
$2500 @ 3.61% V -- $25.85 for 10 years

Wells Fargo
$21,725 @ 3.25% V -- $152.65 for 15 years

Great Lakes
$7200 @ 3.44% V -- $41.90 for 20 years
$18,500 @ 3.4% V -- $109.46 for 20 years

Total
$58,025

Wells Fargo agreed to consolidate my loans at 5.5% (V) for 20 years, but I fail to see the reason for doing so, as the interest rate is a lot higher than 4 of my current ones. Do variable interest rates change that drastically? Is my only benefit here just not having to send 6 checks in every month?

Getting the consolidated loan would put my monthly payment at $399.15 for 20 years (at 5.5%). If I didn't, I'd pay a total of $423.21 a month for 10 years, and then my payments would go down as I'd have the AES loans paid off (and then, subsequently, down again after 15).

I guess I'm just asking-- is it worth it? Am I missing some other incentive for consolidation? Anyone have any experience with this?
 
Loan consolidation is usually a good thing if you can get it at a decent rate. (That won't change.) It also makes it much easier on you for making the payments.

So far all mine are through the same bank, sooooo far.
 
private loans can be difficult to consolidate. i'm guessing the ones with 6.8% interest are private with good rates.

the good thing about consolidation is that you lock in your rate. usually student loans feature variable rates that adjust the 1st of july for federal loans (for loans disbursed before june 30, 2006). that will probably be going up in the future.

from what i can tell, private loan consolidation is still variable.
 
Originally posted by: ElFenix
private loans can be difficult to consolidate. i'm guessing the ones with 6.8% interest are private with good rates.

the good thing about consolidation is that you lock in your rate. usually student loans feature variable rates that adjust the 1st of july for federal loans. that will probably be going up in the future.

from what i can tell, private loan consolidation is still variable.
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The ones at 6.8% are most likely fixed-rate Stafford loans. You can consolidate them, but the interest rate won't be any lower. It could actually be higher since they typically round the interest rate up to the nearest 0.25%.
 
Originally posted by: Special K

The ones at 6.8% are most likely fixed-rate Stafford loans. You can consolidate them, but the interest rate won't be any lower. It could actually be higher since they typically round the interest rate up to the nearest 0.25%.
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yeah it looks like the laws governing the programs changed since i was in school:
link
 
I don't know much about student loans, so I don't know if this applies to you, but rates are dropping for Federal student loans in July:

http://www.fastweb.com/financi...n-loans-to-drop-july-1

Actually I just noticed your variable rate loans are already around this rate, so I guess it's not really helpful.

I don't see the incentive for you to consolidate in that situation. Maybe you can consolidate the lower-interest variable rate loans to a fixed rate if it's decent to lock them in at the historically low rates right now, and then just try to pay off the higher-interest loans off ASAP.
 
Originally posted by: goog40
I don't know much about student loans, so I don't know if this applies to you, but rates are dropping for Federal student loans in July:

http://www.fastweb.com/financi...n-loans-to-drop-july-1

Actually I just noticed your variable rate loans are already around this rate, so I guess it's not really helpful.

I don't see the incentive for you to consolidate in that situation. Maybe you can consolidate the lower-interest variable rate loans to a fixed rate if it's decent to lock them in at the historically low rates right now, and then just try to pay off the higher-interest loans off ASAP.
Click to expand...

Wow... I may consolidate my federal loans in that case. The problem I'm having is no one wants to give me a fixed rate for consolidating. Wells Fargo told me they are not locking in interest rates for anyone at this time.

I don't even think AES will consolidate all my private loans at a fixed rate either.
 
81% of your total outstanding loans are currently at 3.4% or lower, so I don't know why you'd want to consolidate everything at 5.5%. You'll be paying a hell lot more over the life of the loan.

Tell Wells Fargo you want 4.0% and nothing higher. They'll be losing money by saying No so you really have nothing to lose by asking.
 
Those guys arent doing long term fixed rates now because they know interest rates are going to shoot up in a few years. I consolidated my loans back in 2004 or so at 2.12% 🙂

 
Originally posted by: 2Xtreme21

Wow... I may consolidate my federal loans in that case. The problem I'm having is no one wants to give me a fixed rate for consolidating. Wells Fargo told me they are not locking in interest rates for anyone at this time.

I don't even think AES will consolidate all my private loans at a fixed rate either.
Click to expand...

assuming you've got the june 30, 2006 or earlier loans, both stafford (subsidized and unsubsidized) types become fixed upon consolidation.

i've not been able to find anyone who will do a fixed interest rate loan to consolidate private loans with nothing more. you'd have to put up collateral to do it (like a second mortgage, one of the few times a second mortgage makes sense)

so what you should do is consolidate any non-consolidated stafford loans after july 1, 2009 (when the interest rate drops). leave the private ones be unless you can find someone who will give you a lower rate based on your creditworthiness.


http://www.loanconsolidation.ed.gov/
it looks like if you start an application now they'll hold it until july 1
 
Originally posted by: RaistlinZ
81% of your total outstanding loans are currently at 3.4% or lower, so I don't know why you'd want to consolidate everything at 5.5%. You'll be paying a hell lot more over the life of the loan.

Tell Wells Fargo you want 4.0% and nothing higher. They'll be losing money by saying No so you really have nothing to lose by asking.
Click to expand...

All of his 3.xx% loans are variable rate - there's really no way to say for sure whether or not locking them in at 5% fixed would be a better deal in the long run. If interest rates skyrocket in the future, 5% might end up being a good deal.

Of course he already said his lender won't consolidate to a fixed rate, so it doesn't really matter.
 
I wouldn't do it. If it were 5.5% fixed, I'd pay a little bit for the security. 5.5% variable is a gamble, with no real benefit to you.
 
You should look at what the variable rate is based on, but in general it never makes sense to consolidate a variable rate for a higher variable rate.
 
I wouldn't do it.

Pay the minimums on all the loans, and put all extra income towards paying off your AES loans first. Then roll your extra income to your Great Lakes loans after AES is paid off.

If your goal is only to pay the minimum, you'll take it up the ass regardless of consolidation or not.
 
Originally posted by: 911paramedic
Loan consolidation is usually a good thing if you can get it at a decent rate. (That won't change.) It also makes it much easier on you for making the payments.

So far all mine are through the same bank, sooooo far.
Click to expand...

I had gotten all of mine from Wachovia.

Then my third year, they decided to start transferring loans out to ACS once they were fully disbursed. However, they didn't do that for all of them.

I got a letter from ACS the other day telling me that one of my loans got transferred again.

So now, I don't know where anything is. The only thing I can go by is my credit report.
 
Originally posted by: ElFenix
private loans can be difficult to consolidate. i'm guessing the ones with 6.8% interest are private with good rates.

the good thing about consolidation is that you lock in your rate. usually student loans feature variable rates that adjust the 1st of july for federal loans (for loans disbursed before june 30, 2006). that will probably be going up in the future.

from what i can tell, private loan consolidation is still variable.
Click to expand...

Federal Loans no longer "adjust" on a yearly basis, although Congress decided to lower the rates over the next three years, until it reaches 3.4% for the 2012-2013 school year . Graduate student loans will stay fixed at 6.8% during that time. Also you cannot consolidate into the cheaper federal rates. The new rates are for origination only.
 
Originally posted by: ElFenix
Originally posted by: goog40
I don't know much about student loans, so I don't know if this applies to you, but rates are dropping for Federal student loans in July:

http://www.fastweb.com/financi...n-loans-to-drop-july-1

Actually I just noticed your variable rate loans are already around this rate, so I guess it's not really helpful.
Click to expand...

wow, even better than the rates i locked in at back in 2005 :shocked:
Click to expand...

Unfortunately for most current student loan borrowers, federal loans have been on a fixed rate of 6.8% since 2006 and those loans aren't eligible for that particular loan consolidation.

The Department of Ed has slowly been taking over all of my federal stafford loans. I'm pretty much stuck consolidating with them at this point.
 
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