Re-consolidating student loans

[triplefigs]

I keep getting notices in the mail about re-consolidating my student loans which I consolidated after I graduated in 1997. Anyone do this? How do I pick a reputable company? Any advice and help appreciated.

 

[kpm76]

I consolidated before the rates went up last year through Nelnet. I did not contact them directly though but went though the higher education office in our state and asked them to do the work for me. I wanted to make sure the company was reputable....good luck!!

 

[OhMari]

If you consolidated your loans already-don't do it again unless you can get a lower rate. If anything, rates are doubling come this July. So don't get fooled into thinking you need to reconsolidate.

You cannot consolidate Federal loans with other student loans. So most students have to make 2 payments when they are done with college. The federal government will give the lowest rate, don't roll that one to a consolidation loan.

 

[rhett972]

Hello triplefigs.

Consolidation can be a good solution for those who have mutiple loans or are concerned about an increase in interest rate. There are a lot of changes happening in the student loan industry right now which may prevent you from taking advantage of the benefits that consolidation can offer such as a fixed interest rate, extended terms, or borrower benefits. If you are considering consolidation, now is probably a better time than later.

As I am sure you are aware, there are a lot of companies that are offering consolidation services - unfortunately, many of these companies are strictly in the business of bait-and-switch. They lure you in promising extremely low interest rates or other incentives but before you are able to take advantage of these incentives, your loan is sold to another bare-bones company who is not obligated to honor any of those incentives.

The primary key to consolidation (or any loan for that matter) is to first find a business that you trust. Look for recognizable names such as Sallie Mae, Nelnet, CitiBank, etc. Ask your friends and family - especially those who have been with the same student loan provider for 5 or more years. Don't be tricked into a 30 year loan that will be sold more times than you can keep track of.

If you would like additional information regarding consolidation, feel free to email me or post your questions on this board. I'll watch the thread and answer any questions I can.

 

[rhett972]

If you consolidated your loans already-don't do it again unless you can get a lower rate. If anything, rates are doubling come this July. So don't get fooled into thinking you need to reconsolidate.

You cannot consolidate Federal loans with other student loans. So most students have to make 2 payments when they are done with college. The federal government will give the lowest rate, don't roll that one to a consolidation loan.

Hello Mari,

This isn't entirely accurate. Student loan interest rates are set each July 1 based on the most recent 90-day T-Bill auction rate published on May 31. We don't know what that rate will be yet although all indications suggest that it will probably go up 1-2 points. Worst case scenario, today's student loans top out at 8.25%.

In Figs case, this doesn't matter because new consolidations (or re-consolidations) are based on a weighted average of the existing loans. It is not possible to lower an interest rate through consolidation and, in fact, the rate may increase by as much as 1/8th percent. However, some people still find that it is beneficial to re-consolidate in order to lower their payments by receiving an extended term or becoming eligible for new deferments such as economic hardship and unemployment deferments.

The number of payments required prior to consolidation eligibility varies with each lender but I would strongly suggest that the Government does not give the best terms for many borrowers. Many lenders offer better incentives and repayment options than the Federal Direct program can offer although I would certainly suggest keeping all options open.

By the way, if you really want to re-consolidate but you "sadly" only have one loan (normally making you ineligible) you could consider a spousal consolidation - assuming your spouse has a federal student loan as well. Not all lenders will offer this option but several do and some offer pretty good incentives to do so.