Student Loan Question

**maat55** · 06-28-2008, 07:45 PM

We went through the same thing with our girls, I guess you have the option to lock in each individually at possible lower rates or consolidate at the end. I wish I had been more involved with this at the time. Good luck.

**Seeker** · 06-28-2008, 08:45 PM

You consolidate if it behooves (lol - old word) you to do so. Essentially to get a lower interest rate overall.... but you don't have to do so.

The reason loans have to be applied for each time is because rates fluctuate over the years..... and the loaning companies want to make the most $'s they can. I suppose like anyone else.

But, as far as I know, you can combine payments regardless of the fact that they are different interest rates. If you look at what they do on the Loaning Company side, they split out your payment for each of the loans regardless of consolidation.

DH consolidated, and we made one payment to one company at one interest rate. The billing booklet showed the original amounts and dates of each loan. We looking into the online details, we could see that each payment was split or allocated toward each loan date. So, even when the rate is consolidated, they still split the payment among the different loan periods. Or at least this company did.

**nextel500** · 06-29-2008, 05:40 PM

Make sure you consolidate them; it is very important to do so or else there will be separate APRs for each and they reset. If you consolidate them, they cannot reset because they are at a fixed cost. People ask me this all the time and I tell them instead of getting student loans, if they can afford it, put it on a credit card. It is easier and better especially if you need to file chapter 11 you can write off a credit card debt but not a student loan. Also making one payment is better than making more than one.

**maat55** · 06-29-2008, 05:59 PM

Originally posted by nextel500 View Post

Make sure you consolidate them; it is very important to do so or else there will be separate APRs for each and they reset. If you consolidate them, they cannot reset because they are at a fixed cost. People ask me this all the time and I tell them instead of getting student loans, if they can afford it, put it on a credit card. It is easier and better especially if you need to file chapter 11 you can write off a credit card debt but not a student loan. Also making one payment is better than making more than one.

I disagree with funding education on CC's. And setting up your finances to be BK friendly is bizarre. It's better to learn good money management fundamentals like living on less than you earn and paying off your SL debt before you buy expensive homes and cars.

A good rule of thumb is to try never having more debt than you have liquidable assets.

**nextel500** · 06-29-2008, 06:09 PM

Originally posted by maat55 View Post

I disagree with funding education on CC's. And setting up your finances to be BK friendly is bizarre. It's better to learn good money management fundamentals like living on less than you earn and paying off your SL debt before you buy expensive homes and cars.

A good rule of thumb is to try never having more debt than you have liquidable assets.

Well think about it for a moment. Let us say you pick some sort of cash back credit card either into a high yield savings account or just a regular one. I will pick American Express since I have them as well as I know them the best. You can pick a 5% cash back or a 1% match into a high yield savings account yielding 2.75%, this can change. So if you do that and over 4 years or how long ever the duration is when you go to college you can get money back and help pay for the monthly bill. Moreover, if you have any problems, you could always negotiate or does a balance transfer to get that to a fixed cost. Chances are, if you have great credit, your APR should be quite low on both the balance transfer and the APR for purchases. So not only do you gain money back, you also increase your FICO score. Today�s student loan rates are quite high and will reset higher, probably.

**neguy11** · 07-03-2008, 12:39 AM

If you have all of your loans at one lender, you will make one payment. Each school period is going to have it's own loan, with it's own payment, but the company will combine each payment into one "lump sum" you pay each month. Now sometimes the computers might screw up and give your loans different due dates, in which case you should call the lender and ask them to align your due dates so that everything is due on the same day and you can make one payment.

Consolidation does NOT automdatically lower your interest rate, contrary to popular belief. It simply lets you lock in a fixed rate (based on a weighted average of your current loan rates rounded UP to the nearest 1/8th of a percent). In the past many lenders offered incentives, but those are gone. All student loans taken out after July 1, 2006 are already at a fixed rate, so you wouldn't really need to consolidate unless you have loans at many lenders and just want to make one payment.

If you have any questions call your lender, they should be happy to help you, unless it's Sallie Mae because they have horrible customer service and it's nearly impossible to understand what they are saying! Then again I am biased because I work for their competitor

**neguy11** · 07-03-2008, 12:44 AM

Originally posted by nextel500 View Post

Today�s student loan rates are quite high and will reset higher, probably.

Stafford loans taken out before July 1, 2006 just reset from 7.22% down to 4.21%. Stafford loans taken out after July 1, 2006 are fixed at 6.8% (or 6% for Subsidized loans this school year). That is lower than most credit card rates.

Putting tuition, housing, and fees onto a credit card is not feasible for most students. My first credit card had a $500 limit....that would cover ONE class. Not to mention, I couldn't pay off the balance in full each month, so the interest I would accrue would negate any meager incentives I got.

Now if mom and dad are footing the bill AND they have the cash to do it, they might as well put in on a rewards card and then pay off the balance in full. But other than that situation, I don't see how using a CC for college costs is feasible for the average student.

**maat55** · 07-03-2008, 03:38 AM

Remember, when you consolidate, you don't have to do so with lender you are with now. Shop around for a better rate.

**JanH** · 07-03-2008, 07:33 AM

I need to talk more with my DS, but his loans from graduate school got caught up in the credit mess and they wouldn't let him consolidate them. So, I think he is paying them individually which is more painful for them right now. They'll get rid of them faster, but they were planning on consolidating them like they did DIL's a few year's earlier. I don't know what the status is now, though. Also, if you are going into education, check with your state and see what their status is before consolidation. DIL was able to get some kind of loan "forgiven" because she became an educator. But, it could only be done BEFORE consolidation. If she had found out later, she couldn't have forgiven the loan.

**postit1979** · 07-03-2008, 08:13 PM

Originally posted by neguy11 View Post

If you have all of your loans at one lender, you will make one payment. Each school period is going to have it's own loan, with it's own payment, but the company will combine each payment into one "lump sum" you pay each month. Now sometimes the computers might screw up and give your loans different due dates, in which case you should call the lender and ask them to align your due dates so that everything is due on the same day and you can make one payment.

That is the answer I was looking for. I guess for some reason I didn't realize that I was going to have to reapply each year and was afraid that if you went to college for 4 years that would be 4 separate loans and 4 separate payments even it it was to the same lender.

Student Loan Question