Student Loan Consolidation

[GingerPow]

Does anyone at this font of wisdom familiar with this?

I have been reading lately that student loans should be consolidated by July 1 in order to avoid higher payments as the rate will be going up.

DD is entering senior year of college. Her only loan is a small FAFSA (federal) loan.

It is my understanding (and could be totally wrong) that to consolidate a loan is to bring more than one loan together into one payment.

Is that correct or off-base? Is there something we should be doing now with her one loan to prevent higher payments after her '07 graduation?

No matter how much I Google, I'm not finding an explanation that is helpful. Even DH, who knows the ins & outs of loans pertaining to real estate is stumped on this one.
Thank you in advance for your help here!

[Robyn1007]

I don't believe (but I'm not sure) she can even look at consolidating until after she graduates. But, as far as the single loan goes, are you sure it's just one loan? Did she take money multiple years? If she did, it may be considered more than one loan and eligible for consolidating once she graduates. I consolidated mine over a year and a half ago before the last hike, thank goodness, but I can't understand why the government wants to continue to make it more difficult for students to earn a college degree. :rolleyes:

[GingerPow]

I don't believe (but I'm not sure) she can even look at consolidating until after she graduates. But, as far as the single loan goes, are you sure it's just one loan? Did she take money multiple years? If she did, it may be considered more than one loan and eligible for consolidating once she graduates. I consolidated mine over a year and a half ago before the last hike, thank goodness, but I can't understand why the government wants to continue to make it more difficult for students to earn a college degree. :rolleyes:
Robyn, that is an interesting aspect. She has had this same FAFSA loan since freshman year. It gets renewed for every upcoming semester. Is that what would be consolidated - each renewal is considered a separate loan?

How did you consolidate your loan? Who did you go to? I am totally clueless on this. By the time DS and DD#2 go to college, I'll be experienced, but now it's still unfamiliar ground to cover. I will check and see if we can do something now, a year before graduation, or if she has to wait.

Yes, you are quite right. Of all people to help and encourage, it should be the people who are trying to educate themselves and become responsible, tax paying citizens of this country. Boy could I go off on a tangent here, but I will leave it at that.

Thank you so much!

[sillybeans]

Yes, she can consolidate now. However, she will lose the 6-month post graduation deferral and will have to begin repayment immediately (at least that's how most work).

Consolidation basically means selling your gvmt. student loan to a private company, at a specfic rate. This locks in the rate. You can only consolidate once.

If her loans are small, the convenience of delaying repayment may make up for the increase in interest.

HTH,
Tracy

[Robyn1007]

Hmm, see, my loans went from a state based lender to a federal government direct consolidated loan so its not necessarily going to be a private lender. I used this website: http://www.loanconsolidation.ed.gov/. In reading further this is a specific type of consolidation and one of my loans was a federal direct student loan. Also, I see that she can do it while still in school so I would absolutely take a look. You might also call the college's financial aid office, they may be able to help too.

[GingerPow]

Robyn and Tracy - THANK YOU ~ you are so smart!
I learned more from you than all the research I've been chasing after.
You've both given me something concrete to follow up on! I really appreciate that! http://i45.photobucket.com/albums/f60/MurphChessLinus/smileyanimatedbouncy.gif

[helios7]

Thanks for this reminder you guys....

I have mucho mucho loans and must consolidate this week... note to self -do NOT forget!

[Linda428]

I just completed the process. Used the same site that Robyn posted. My son will graudate Dec 2006 and hopefully this whole process of consolidation will save him some money. It didn't take that long to complete the application on line, and when I had questions, I called and they were very helpful. Good luck!

[GingerPow]

Robyn and Tracy - THANK YOU ~ you are so smart!
I learned more from you than all the research I've been chasing after.
You've both given me something concrete to follow up on! I really appreciate that! http://i45.photobucket.com/albums/f60/MurphChessLinus/smileyanimatedbouncy.gif
Adding Linda428! Does your DS have a FAFSA loan as well? Did they tell you that he'll lose the grace period and have to repay right after graduation?

[sillybeans]

Actually, when I consolidated (which was a few years ago, and while I did use the link Robyn provided my loan is now owned by a private company) you had to begin payments IMMEDIATELY upon consolidation, not just after graduation.

Definately something to clarify before you make a decision.

Tracy

[gertdog]

I consolidated my loans 2 years ago and went through the federal government site that Robyn posted. So my loans are still serviced by the government but I locked in a lower interest rate than I'd originally had.

Even though I took out several loans over the years I was in graduate school, I only ever had one monthly payment, both before and after consolidation.

Ginger, if your daughter is getting a loan each semester, the interest rate on each loan probably varies a little bit from semester to semester. Consolidation would bring those loans together at a single interest rate that is based on a weighted average of the current interest rates on all her loans.

As for the grace period- I think she would still get a 6-month grace period, but the clock would start ticking now instead of at graduation if she consolidated while in school. Given the probable jump in interest rates it might be worth consolidating now. There is an online calculator on the website Robyn posted that can help you figure out whether it is worthwhile now.

Also, when your daughter does enter repayment, note that the government loans offer a .25% reduction in the interest rate if you make payments automatically from your bank account. When I began repayment there was also a program that offered a .25% reduction after you made your first 24 payments on time. So, I ended up with a .5% reduction, and that has remained in effect after I consolidated (i.e. I get .5% reduction off my lower interest rate)- very nice!

[Linda428]

Yes, my DS has an FAFSA loan. And yes, he will lose the grace period and have to start paying right after graduation. My DH & I are prepared to help him out if he doesn't obtain a job right away. We've bee making the interest payments for him all along.......

[springsgourmet9]

GingePow,
I have been researching this for the past two weeks since I have two sons with approximately 1 to 1 1/2 years of college remaining. It is so very confusing but I received many answers after persistance with several agencies. Because of the privacy act it was like pulling teeth to get the exact answers I needed.

I felt it was definitely worth consolidation due to the interest rate increasing almost 2% in July. I have spoken to Financial Aid offices, agencies where the loans are currently serviced and several parents to come to this conclusion. I was very skeptical (thats my middle name) as I thought it might be a scam to consolidate at a higher rate but here is what I found out.

Your childs loans can be deferred while still in school (but this may depend on the type of loan she has so check this). Mine have mostly Stafford subsidized and they qualify for in-school deferment.

She will lose her 6-month grace period with consolidation which means she will have to begin repayment upon graduation.

There is no pre-payment penalty.

The new consolidation interest rate is based on weighted average of her current rates.

I see no reason not to consolidate as there are no fees involved to do this, the only thing she'll lose if the 6-month grace period.

You/she can log onto www.NSLDS.ed.gov. Enter her SS number and the site will give you all the current loans and interest rate data as this is the National Student Loan Data Base. Then you have to decide on the company you want to consolidate with and complete the application on their website.

Good luck.

[jjsooner73]

FYI if you will be consolidating with the Federal Direct Student Loan. I attempted to do this last year before the rate hike. Actually, I did beat the July 1 deadline. However, they drug their feet and never took care of business before my loan was sold this past February. They then cancelled the consolidation loan app. and I lost the opportunity to get a lower rate. I was told it wasn't their fault. :( Mild mannered me yelled at the smart arse person on the phone who just said "OH well, it's too late. Can't help ya. You can apply again though."
So, I did finally consolidate, but it is now with a private servicer and is no longer held through the federal government.

So, if you do consolidate, do it ASAP and stay on their case. That's what I didn't do. I called a few times, but then was caught up in moving and all that goes with that and then it was too late.

[zippy478]

I just did this too and the fact that you lose your 6 month grace period is true but can be avoided/changed if you put your loans into forbearance right away. Most lenders will offer/approve forbearance applications - especially if it is for hardship reasons. Also remember that many lenders offer different payment plans where you can pay interest only for a few years and then start paying on the principal. It may spread out/make you pay more in the end but it will help with someone who is just starting out. And, I think forbearance can be longer than one year - it depends on the lender.

I would strongly advise anyone looking to do this to talk to the financial aid officers at the school as well as the loan providers. They should be very helpful.

And, make sure when you start the process that you have all your loan information together as once you submit it - you can't change it.

It's true that you can only consolidate once, unless you consolidate new loans into it. Last summer I didn't realize this. I had already consolidated my undergrad loans and didnt' think I could do it again. Found out after July 1 that I could have included them because I was consolidating them into new loans (my grad school loans) I have since submitted a new application this year to consolidate my loans from last summer plus my undergrad loans plus my last semester of law school loans. Even though the interest rate was so much lower last summer, having that 2.8% in there with the 8.75% that is my undergrad loans will actually save me money because of the weighted average interest rate.

Good luck and I hope this helped a little.
Maura :)

[GingerPow]

Thanks all! I'm printing all replies, getting busy and having DD go to the school's financial aid office.