Consolidating private loans may cost you anywhere from 1-5% of your total loan volume. Generally speaking the lender will roll that amount into your outstanding principle balance.
Neither one has an out of pocket expense at the time of consolidating, but your private loan volume with increase. You just need to decide if the loan term and interest rate provided warrant the 1-5% fee you will be charged.
Five most recent student loan consolidation blog posts:
It is no surprise that the default rate on Federal student loans is the highest it has been since 1998. It can be kind of tough to make your monthly loan payments when you don’t have a job. With unemployment rising, so to is people’s inability to keep up with their student loan payments. [...]
There are many dirty little secrets in the consolidation world. As previously discussed consolidation is not always a wise move, in that it merely extends your repayment terms, and thus, the amount of money you owe.
Another downside to consolidation is connected to your borrower benefits. Many students consolidated their federal loans a few years ago when borrower benefit packages were prevalent, but that is not the case today.
My buddy Jason consolidated his loans in 2003 and was offered a .50 ACH and 1% rate reduction discount after 24 consecutive months of on time payments. If he wanted to reconsolidate his loans today with the Direct Loan Center he would lose his 1% rate reduction and reduce his ACH discount to .25.
Just be sure to weigh the pros and cons while looking at every possible angle. And remember, just because you’re out of school doesn’t mean the homework stops. It is just as important as ever.
Five most recent student loan consolidation blog posts:
Consolidation is used as a debt management tool. Millions of students utilize the consolidation process to make their monthly payments more affordable. How it generally works is that your loan terms get extended whereby reducing your monthly obligation. Prepayment penalties do not exist on the federal side and in most cases there are no prepayment fees on the private side as well. It is definitely an option worth considering. In addition, if you have a federal Perkins loans you may want to volunteer in the Peace Corps or VISTA.
Obama signed a 5.7 Billion dollar measure to boost volunteerism on Tuesday, April 21. The new law authorizes the increase of Americorps to 250,000 from 75,000 by the year 2017. If you have Perkins loans, Up to 70 percent of your loans may be forgiven for your volunteer service. With more positions becoming available it may be something worth exploring.
For many the pain of student loans lasts far longer than the pain of a failed marriage.
At one time it was in vogue for a married couple to do a spousal consolidation with their federal student loans. After all, your two worlds were merging together, why not student loan debt too? It just seemed to make sense. But the problem was the loan could only be listed under one name, which means if you did the spousal consolidation only one person was going to be legally responsible for repaying the full weight of the debt, for better or worse.
So if John and Jane Doe got married, did the consolidation, and had the loans listed in John’s name that would mean that Jane was in the clear with the impetus to pay off the loans solely falling on John. That’s probably why the Department of Education changed the rule.
Spousal consolidation is no longer an option. But trust me when I say it wasn’t right for you with 41% of marriages ending in divorce.
Five most recent student loan consolidation blog posts:
Would you notice if your consolidated lender changed hands? Do you even know who your lender is now? The reason I ask is because the student loan industry has been turned upside down over the past 18 months, which I’m sure you all know, and many lenders have sold off their portfolios to other lenders. As a result millions of students are no longer with the lender they consolidated with.
What I want you to do is make sure your borrower benefits carried over if you are one of the millions whose lender changed. I personally know two people who discovered that their new lender was not applying their 1% discount which they had earned after 24 months of consecutive payments with their previous lender. It is worth the time to check. If it has happened to two of my friends I know there are many others who are in the same boat and don’t even know it.
If you find out they were giving you the shaft come back and leave a message telling me how awesome I am!
Five most recent student loan consolidation blog posts:
The fact the prime and LIBOR index are currently at historic lows does not effect your consolidation rate. That first line probably hit you like ice water to the face on a Monday morning, but I felt it was best to just rip the band-aid. You’re probably thinking how is that possible? How can the economic landscape not be considered when calculating my interest rate? I keep hearing how Obama wants to do more for students. Shouldn’t this be one of his priorities? That would certainly make sense to me, but nothing appears to be in the works to address this matter.
Below are a few reasons the current state of the economy will not effect your consolidated interest rate.
1. Rates change but once per year, each July 1. The Department of Education will examine the 91-day T-bill leading up to July 1, which is influenced by the Fed Funds Rate, and peg the rate at a certain margin level above that. We’re still 2.5 months away from that however.
2. Any federal loan with a fixed interest rate can not be lowered. If you are looking to consolidate and have a collection of fixed interest rates they will not be lowered thu the consolidation process. Consolidation simply takes the weighted average of your current loans rounded up to the nearest eight percent to determine your interest rate.
3. Subsidized and Unsubsidized interest rates are already known through the 2012-13 academic year. So basically you can completely throw what the economy is doing for the next few years out the window as it pertains to any subsidized or unsubsidized Stafford loan, which also includes the Grad Stafford.
The only people that may benefit from the slumping economy are those who still hold variable rate federal loans, which were dispersed before July 1, 2006 and have not yet been consolidated. Those are still subject to the market and will be moving this July.
Five most recent student loan consolidation blog posts:
Applying the basic laws of probability one knows if they flip a fair coin they have an equal chance of it landing on heads or tails. Now suppose I told you I knew for a fact that it was going to land on tails for whatever reason; that knowledge would be quite valuable. Borrowers who consolidate their federal loans have the same preemptive window of knowledge.
Every July 1 the new interest rates goes into effect, and the new rates are pegged at certain margins above the three-month treasury yield in late May. That means you will know what your interest rates will change to in advance of consolidating. The reason this is so important is because when calculating the interest rate on your federal consolidation it is a standard formula. It is the weighted average of all your loans and the interest rates they hold rounded up to the nearest eighth percent and then fixed for the life of the loan.
If you know in advance that some of your interest rates are going down on July 1 it would make sense to consolidate after July 1 to bring down your total weighted interest rate. If you see they are going up you will want to consolidate before July 1.
Keep in mind for those of you who already hold fixed interest rates, the July 1 rate changes will not impact you. The rate changes will only impact those who have a variable interest rate.
Outstanding student loan debt has now grown to more than 500 billion, which is nearly as much as our 675 billion U.S. Trade Deficit. Students are in over their head, and struggling mightily.
According to the Department of Education from 2006 to 2007 the default rate on student loans sky-rocked by 5.2 percent to 6.9, and the 2008 and 2009 default rates are likely to be even higher. For this reason alone federal consolidation makes sense for many students.
If you previously consolidated your federal loans and it wasn’t with the Direct Loan Center, you may consolidate with them now and refresh your deferral benefit. Deferral benefits last for three years. So basically if you are almost tapped out of those three years with your current lender it makes sense to re-consolidate and refresh that benefit until brighter days emerge.
So before you let your your loans slip into default it would be prudent to explore this option first. It may not be the means to an end, but it would certainly serve nicely as the means to a temporary fix.
Five most recent student loan consolidation blog posts:
What do three of my friends who do not own a home, and me, who is a home owner have in common? Answer, we all have monthly payments in the $1,200 – $1,600 range. The big difference is that my money is going toward my home while there’s is going toward their student loan payments.
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