Advice on consolidating student loans

Rankenphile · May 2012

I'm about to begin payment on my student loans. I received federal sub and unsub loans as well as a private student loan or two from a bank (I don't have the exact number handy at the moment, but everything is in my files at home). I currently bank with a local credit union and want to consolidate my loans to make them easier to pay. Having never done this before, I was hoping to get some advice from folks who may have more experience with this.

Thanks.

ED! · May 2012

I'm not sure what the positives - other than consolidation - would be to do this. I suppose you could get a better rate (below 3.4%); however I would imagine the "flexibility" of the government beats your credit union hands down.

Draygo · May 2012

What are the rates of each of the loans? 4.5%?

If they are on the low end of the scale it isnt worth consolidating, just continue to write the seperate checks.

Thanatos · May 2012

Mathematically speaking, if you're making minimum payments for the foreseeable future, it's probably in your best interest to consolidate. If you're going to be making higher-than-minimum payments, it's probably not, but either way, it's going to depend upon several factors:

1) Interest rates (both of the individual loans, and the consolidated loan)
2) Principle remaining on the loans
3) Minimum payments on the loans
4) Payments you actually expect to be making on the loans
5) Your highest tax bracket (since you can write off interest repayments)

Credit Karma has a decent loan calculator that should help you out. The long and the short of it is that the more you can afford to pay from month to month, the smaller the advantage of consolidating becomes (because you pay off your highest interest rate first, it reduces the average interest rate of the remaining debt).

Rankenphile · May 2012

I'm more concerned with reducing the number of places I need to be sure to pay each month and simplifying the process more than I am concerned with interest rates. I plan on making as large a payment as possible while I've got the funds available.

Appreciate the advice, though. I'll take it into consideration, to be sure.

Blake T · May 2012

Is it more remembering to do so rank?

If so, talk to your bank about automating payments the day you get paid.

ED! · May 2012

Blake T wrote: »

Is it more remembering to do so rank?

If so, talk to your bank about automating payments the day you get paid.

Exactly. What bank these days doesn't have BillPay of some sort?

Rankenphile · May 2012

Sort of, yeah. That and a general mistrust of banks and other entities to handle on time payments correctly without fucking something up over the next bunch of years. Some of my loans were transferred or purchased by other organizations Im not familiar with. I'd rather deal with one organization, one place to make payments to, and not have to stress that all five payments, or whatever, are processed correctly and on time.

kaliyama · May 2012

If you have a bunch of loans at low, relatively-same interest rates, you might go ahead and consolidate those, but you should keep separate any loans that are at a higher interest rate and pay those off first. You'll save money.

Blake T · May 2012

Your millage may vary of course, but I have never had a problem with automated payments going through with my bank. The only problem I have is with my bank taking a few days more than other banks to process them.

Thanatos · May 2012

Rankenphile wrote: »

I'm more concerned with reducing the number of places I need to be sure to pay each month and simplifying the process more than I am concerned with interest rates. I plan on making as large a payment as possible while I've got the funds available.

Appreciate the advice, though. I'll take it into consideration, to be sure.

Make sure your consolidated loan doesn't have any penalties for early repayment (it shouldn't but who knows what the fuck banks are getting up to these days).

Also, you should compare the consolidated loan to what the aggregate payments on the loans you have now should be just to see what taking the consolidated loan will cost you. Depending on how much above the minimum payment you're paying, it could mean thousands of dollars in the long run.

Edit: Ahhhhh, the Googles have everything. Here is a snowball debt calculator. You should be able to plug all of your loans into their with your total expected payment and it will tell you how much you'll end up paying total. Keep in mind that this won't be 100% accurate, because your student loan interest is tax-deductible, so everything grouped under "interest" will be a bit cheaper.

You can use the other loan calculator I posted to check what you end up paying on consolidated loans. And you are right that consolidated debts do have their advantages, in ease of payment. You're just consolidating student loan debt, though, right rank? No car, home, or credit card debt being lumped in with that, right?

Rankenphile · May 2012

Yeah it's all student loans. I have everything else paid off.

Thundyrkatz · May 2012

You should take a look and see if your interest rates are fixed or if they reset periodically. The federal student loans can be consolidated through the government and locked in at a low rate, which is set at something over prime. Prime being at record low levels at the moment.

here is the website http://www.loanconsolidation.ed.gov/

They can also lower your payments through a number of methods. This is done by extending the term, so you will pay more money over the longer term, but your short term debt obligation will be lessened. So if you are having trouble making ends meet, this can be a great way to lessen the pain and buy you some breathing room. They can just extend the term, or they can do a graduated method based on income.

Before you try to go the credit union route, keep in mind that the federal student loans are tax deductible, i don't believe that private loans would be the same. Also, if you ever have trouble making payments because you lost your job, its much much easier to work with the government to get some forbearance then it is to work with a private lender.

All things considered, i would try to pay off the private loans first, and then focus on the federal loans.

rijbadgett · May 2012

always beware of hidden charges. read the policy thoroughly.

ED! · May 2012

Sort of, yeah. That and a general mistrust of banks and other entities to handle on time payments correctly without fucking something up over the next bunch of years.

I get a receipt for all my BillPays; so if one was missed I'd certainly be the first to know. I think this fear/mistrust of banks might cause you to pay more than you should be paying in the long run.

Essee · May 2012

If your loans DO happily accept paying online through your bank (you can always check up on that if you don't know), you don't even have to trust the bank to do automatic payments... you can manually pay them yourself through your online Bill Pay page that basically every bank has. That's what I do for my credit card, even though the card is sort of also through my bank (because yeah, I don't entirely trust automatic payments myself, so I understand the feeling). Hell, my mom doesn't trust banks either and she still pays all her bills that way now, never had a problem. Even though it won't be automatically paid if you do it that way, it's still a lot easier to pay things that way, with all the billing info already filled out so all you have to do is type in the amount to pay and BOOM, it's paid. You can just go online and send in a payment whenever you want to pay it (maybe pay all of them at the same time every month?). My bank even shows right there in Bill Pay how much I paid last time and when I paid it. You can also see that the money really was withdrawn from your bank account, and it shows up on your statements too because of that. It should be a lot easier for you than manually paying every individual loan every month.

Naturally, you can indeed consolidate your loans, but I think it might be better to just streamline what you're doing to pay them right now if that's your only concern.

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