Author Topic: Consolidate my Student Loans?  (Read 2780 times)

mh1361

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Consolidate my Student Loans?
« on: March 07, 2014, 11:50:32 AM »
Should I leave my student loans alone, or consolidate them? I'm interested in paying the least amount of money overall, I don't need a lower monthly payment considering I'll be overpaying as much as possible every month. Here are my loans:

Subsidized   $3,324.26   5.35%
Unsubsidized   $26,627.56   6.55%

Great Lakes says:  Interest rates for consolidation loans are determined by calculating the weighted average of the interest rates of the loans you're consolidating, rounded up to the nearest 1/8 percent.

After putting my loans into an online calculator it came out with this result for my consolidated loans:
Interest Rate - Consolidation Loan   
6.250%
Total Loan Balances
Total Consolidation Loan Amount   $29,951.82

I used this calculator: https://loanconsolidation.ed.gov/loancalc/servlet/common.mvc.Controller

Thoughts?

Rural

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Re: Consolidate my Student Loans?
« Reply #1 on: March 07, 2014, 12:30:33 PM »
Are you talking about consolidating into public or private loans? I absolutely would not consolidate loans currently with the Department of Education through a private lender. Too many problems pop up there, and you lose some of the protections associated with federal student loans.

MDM

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Re: Consolidate my Student Loans?
« Reply #2 on: March 07, 2014, 01:32:53 PM »
Didn't see length over which financed, so assumed 10 years.

Consolidated
$29,951.82 at 6.25% over 10 years = $336.30/mo, no extra payments:   120 months, $10,404 interest

Separate
$26,627.56 at 6.55% over 10 years = $303.03/mo, no extra payments:   120 months, $  9,736 interest
$  3,324.26 at 5.35% over 10 years = $  35.83/mo, no extra payments:   120 months, $     975 interest
$29,951.82                                           $338.86/mo                                                        $10,711 interest

Under the above scenario (no prepayments), consolidation is better.  But...what about prepaying only the higher interest rate loan?  In that case:

Consolidated
$29,951.82 at 6.25% over 10 years = $336.30/mo, $100/mo extra pay:     86 months, $  7,210 interest

Separate
$26,627.56 at 6.55% over 10 years = $303.03/mo, $97.44/mo extra pay:   83 months, $  6,543 interest
$  3,324.26 at 5.35% over 10 years = $  35.83/mo, $ *      /mo extra pay:   86 months, $     879 interest
$29,951.82                                           $338.86/mo                                                          $  7,542 interest
*no extra pay on the smaller loan until the larger is paid.  Then put the entire large loan payment ($400.47/mo) as extra pay toward the smaller loan.  Note the $97.44 amount is to keep the total monthly payments ($436.30) equal between the Consolidated vs. Separate options. 

Under this scenario (keep loans separate and prepay only the loan with the highest interest rate), consolidating is still better.
 
« Last Edit: March 07, 2014, 02:36:07 PM by MDM »

mh1361

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Re: Consolidate my Student Loans?
« Reply #3 on: March 07, 2014, 02:08:12 PM »
Thanks for the response, I'll probably go ahead and consolidate the loans. My other option is to wait until I get married and see if we can consolidate all of our loans together, or if it would even make sense.

$200k

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Re: Consolidate my Student Loans?
« Reply #4 on: March 07, 2014, 03:19:18 PM »
One reason not to consolidate are your deferment options.  If these are federal loans, you can have up to 3 years of deferment, for instance during times of umemployment, or you go back to school.  If you consolidate your loans, you get a new 3 year period.

You might never use the deferment, but you never know.  If you consolidate now without any huge benefit, you are cutting your options short.  I would not do it for only two loans.  I believe I had 8-9 loans to consolidate, so I didn't mind. 

Gimesalot

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Re: Consolidate my Student Loans?
« Reply #5 on: March 07, 2014, 06:09:40 PM »
Is the interest on these loans fixed?  Consolidation locked in my interest rate.  Given the low interest rates right now, I would assume that if you don't lock them in, they will increase.

FYI, I took a couple classes a few years after consolidation.  My loans went into deferment on their own. So no issues there.