Is student loan consolidation plan worth it

tswim · Jun 16, 2012

I 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.

DoGoodThenGo · Jun 18, 2012

Did mine (all federal loans) years ago before the big switch/new rules went into effect.

Locked in a low rate (

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.

BabyRN2Be · Jun 18, 2012

PLEASE 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

BabyRN2Be · Jun 18, 2012

Oops, 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.

RNHURT · Jun 18, 2012

Thanks for your comments friends, I will definitely research :)

tswim · Jun 18, 2012

The 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.

RenataL · May 30, 2013

There 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.

xoemmylouox, ASN, RN · May 30, 2013

I think in most cases it's worth it. Again try to read all the fine print. I agree that many who have issues either use a shady lender or simply take out more than they can pay back with current wages.

Tait, MSN, RN · May 30, 2013

I 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.

42pines · May 30, 2013

Banks are being lent huge amounts of money at 0.5%

1/2 % reduction is a joke, a true travesty, but still moving from a variable to current minus 1/2% may be worth it. Current interest rates are anomalous and if market forces predominated they'd move much higher. Eventually, though I cannot say when, I believe they must move upwards.

Were I in any variable rate interest loan, I'd be very, very nervous so I'd say moving from a variable if you are in one to a fixed rate would be well worth it even if the reduction is only 1/2%.

Btw, my student loans carry a rate of 1.625%, consolidated many years ago. Oddly in 2003 I stood up in my nursing class and told all my fellow students to make sure that at least one semester loan came from a 2nd lender--any bank would do. Same loan, same terms. All of them including me had gone with the state lender. But if all your loans come from one lender then you could not seek consolidation and were stuck with the state lender. Since I went with a different vendor for one semester I could seek secondary vendors and did moving from a 7+% fixed to the 1.625%. Others are not and I know that one person with the same loan amount now pays over $700 per month and I pay $106, though the monthly payment will rise next year. So it is well worth researching everything that you can about student loans.

For the inevetable doubters about the 1.625, this copied from Sallie Mae's: manageyourloans.com/MYL2/loanSummary

Consolidation

1-01

$12,605.68

1.62%

$42.82

06/14/2013

Consolidation

1-02

$18,649.48

1.62%

$63.35

06/14/2013

Unreal eh?

They did it once...now with Helicopter Ben's trillions they're doing it for the banksters, but not for hard working graduates!

xoemmylouox, ASN, RN · May 30, 2013

Avoid deferments if at all possible.. You only sink deeper and deeper.