Should I consolidate my 2 student loans under these circumstances?
Jan 30
Student Loans Q&A 30k, fixed interest, loans, variable interest rate 2 Comments
On loan is a fixed interest rate at 6.8 (30k)and my other is a variable interest rate that just decreased to 3.61 (14k). What is the advantage to consolidating them if I am perfectly fine with the amount I pay on both per month? Is it a better long term plan to consolidate these two loans or would it be better to just leave them seperate and continue with my payments? Thanks to anyone that would know the answer.
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Jan 30, 2010 @ 23:53:51
Both of your loans are federal. What happens when they consolidate the loans is they make the 2 loans into 1 loan with a fixed interest rate. It’s based on what the current interest of the loan is(weighted average), rounded up to the nearest 1/8th of a percent. So, with that being said, your low 3.61 is going to increase because the higher interest rate (6.8) has a higher balance. If you call your current servicer, they should be able to tell you all estimations, including monthly payments, total repayment amounts, and interest rates for your loans. You do not have to include both of your loans into the consolidation either. you can consolidate just the 14000 balance by itself so that both of your rates are fixed. If you do not need to consolidate now, you can always wait until like may or june, call your servicer and find out if the interest rates will be decreasing or increasing. That way, if they decrease, you can wait until after 7/1 to consolidate so your rate would be even lower, or consolidate before 7/1 to stop the rate from increasing. If you do not want to extend the years you would be paying back the loans, you can request to have it placed on a 10 yr repayment term again, or you can even just pay your current monthly payments so you would not be obligated to the higher payments, but still pay it off in 10 yrs. One good thing about consolidation though is if you have used any forbearance time, you would receive all of that back once you consolidate the loan. Since your rate is 3.61, you are currently in your grace period, on a deferment, or in your inschool status. If you’re in your inschool status, you’re not eligible for consolidation right now. If it is the grace period or deferment, once either of those status’ end, your interest rate will increase to 4.21, so if you are really interested in consolidating, you would want your application to be received by your consolidating lender before your status changes and you enter repayment. They are able to hold your application so that the consolidation is not completed until after your grace period would end, if you’re in it, but you would still receive the lower rate.
Jan 30, 2010 @ 23:53:51
It sounds like one is a federal loan and one is a private loan. If this is the case, you can’t consolidate them. There is no benefit to consolidation anyway, most of it is hype (from banks) about all the benefits (paying them MORE money in interest because it’s a longer term loan) that don’t really help you much besides lowering you monthly payment.
Don’t do it.