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Originally Posted by jIM_Ohio
More than likely with a payment difference this significant, you have the period of the repayment increased. Even if rate was cut in half, you are still paying 2X more in interest over 20 years than you would have with higher payment and 10 yr repayment period.
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Actually, when I consolodated at the lower rate, my payments dropped ~$50 per month. That is keeping the same 10 year repayment schedule. When I had been paying $175 with the variable interest rate, more of my payment went to the principal. However, after the rates raised, I lost that bonus. By consolidating, I really am saving money even if I'm paying less.
Since my rate was 3.37% I can make more putting the extra $50/month into ING and make almost 2%more with my money.
Also it's worth consolidating because you get discounts from your lender. Mine offers -0.25% for direct withdrawls and after 2 years on time payments another -1.0%. That drops my interest to 1.25%. Even if my repayment period was extended, I'd be making money somewhere else.
This would be true for anyone who can earn a higher interest rate at any bank.