Is student loan consolidation plan worth it
- 0Jun 16, '12 by RNHURTAccording to some Obama plan changes US dept of education is encouraging students to consolidate 2 loans into one with lure of 0.25% reduction in interest rate but I am wondering is there a catch to it ?
Any input is appreciated.
- 0Jun 16, '12 by tswimI don't know about this particular plan, but generally, student loan consolidation is a good thing as it allows you to merge your loans into one (payment) and lock in your interest rates- which get averaged based on the amount of each loan. If you can get a reduction in the interest rate with the consolidation, then it's an added bonus.
When I completed my first undergrad program I did not consolidate my loans at the then rate of ~3%, and when I did consolidate my loans after completing my nursing degree the rates had gone up to >6%.
If there is no catch, which I don't see why there would be, then I highly recommend consolidating your loans under this program.
- 1Jun 17, '12 by DoGoodThenGoDid mine (all federal loans) years ago before the big switch/new rules went into effect.
Locked in a low rate (<4.50%), but IIRC the rate is lower today and likely to remain so with the huge outcry over student load debt.
However you must consider once the loans are consolidated the process cannot be reversed. If you find yourself in future with some extra cash and wish to knock off some lower balance loans, that option is no longer possible after the consolidation process. Payments will be applied to all loans.
The other thing to remember is the interest is often built into the consolidated loan repayment plans. So if possible chose the shortest repayment period. While the monthly payments may be less with a thirty year repayment schedule, you will pay more in interest versus fifteen years. Again because the loans have been locked in by the consolidation process the best you can often hope for is to look for the amount listed as "if paid in full by this date" to pay down the balance totally.
Being as that may did ask a Citibank student loan telephone customer service rep about the last bit. She replied that if one sent in payments well above the minimum amount requested for an extended period of time it could trigger a recalculation of one's consolidated loans. Citibank has since sold off it's student loans to Sallie Mae so don't know if this is still true.
- 0Jun 18, '12 by BabyRN2BePLEASE DO YOUR RESEARCH BEFORE CONSOLIDATING. At the outset this appears to be a good deal, but SallieMae is an evil company with Carte Blanche to add any fees they wish which adds to the interest, which is paid first and the balance never goes down despite the fact that a particular student pays diligently. I know that I've made the largest run-on sentence and may sound like a kooky conspiracy nut, but trust me I know this from experience because a family member has a big problem and is on the verge of suicide because he chose consolidation.
The loan is now exhorbitant and it's threatening to tear up his family. He'll be paying on this therest of his life. When he retires (like if), they will garnish his social security. And student loan debt can never be discharged in bankruptcy.
I've done so much research on this trying to help, I've almost become obsessed with the student loan situation. LOL Remember, if you run behind or default,your professional license can be revoked. A lot of this pain has befallen students who choose consolidation and needed to defer. There's so much to know, so please research the link
- 0Jun 18, '12 by BabyRN2BeOops, I ended too soon. I implore you all to read the stories from every state in the Union on this travesty. At least read the man's story and his reseach on the crooked Sallie Mae schemes at StudentLoanJustice.Org. I swear to you I'm not a kook, I just want everyone educated on this subject. BTW, a few weeks ago there was a peaceful protest outside the Sallie Mae headquarters. Things are getting done but needs to be organized at the grassroots level.
- 1Jun 18, '12 by tswimThe stories BabyRN is talking about have to do with taking out more in loans than you can afford to pay.
All student loans and many other loans (like home mortgages) can take a really long time to pay off because of a thing called 'amortization,' which basically means that the earlier payments on your loans will mostly go to the interest rather than to actually paying down the loan. So, if you have a huge loan, then making minimum payments, you will only see a minimal decrease in your loan balance. Also, you're student loan balances will have gone up while you were in school if they were not subsidized (i.e. the interest was payed for you by the government while you were in school = federal subsidized student loan).
Amortization gives lenders (i.e. banks) some security in distributing loans. In the case of home loans it might make sense to protect the lenders this way, because home loans can be discharged in bankruptcy. But for student loans the laws don't make sense because - and here's the kicker that BabyRN is talking about - you CANNOT discharge student loans in bankruptcy. That is a law issue that you might want to read up on and petition your elected officials about...
I agree with BabyRN that you should definitely read through the terms of your loans, and especially about the associated fees, but I disagree that consolidation is necessarily a bad thing. The key is to minimize the amount of student loans you get to begin with, and make sure that the income you're going earn when you're finished with school is enough to support yourself/family and be able to make more than the minimum payments.
- 0May 30, '13 by RenataLThere is a great variety of services which offer consolidating one’s debts. Of course it is recommended to be highly attentive when turning to one of them, because along with some trying to help people in debts, there are lots of ready to rip off those who for instance took out instant payday loans and for some reason failed to pay it off on time.
So if I were you I would have started with checking state’s law, check the license of the company you are about to deal with and of course look for feedbacks and possible referrals. Remember, it is better to overpay but make sure to deal with a reputable company.Last edit by TheCommuter on May 30, '13 : Reason: Terms of Service
- 0May 30, '13 by TaitI have been looking into this and have decided not to consolidate at this time. My mom did it over 20 years ago and she regrets it. Her loans have increased rather than decreased because of her interest rate and economic deferments and she is soon looking at a $900/month payment. I know she hasn't done the best managing her loans, but I like the idea of flexibility as someone else mentioned with paying off smaller loans etc.