Student Loan Consolidation

[jteezie]

If people can refinance house mortgages to get lower interest rates, I figured, why can't I with student loans?

Given the cheap money around and low interest rates, I thought it might be worthwhile to consolidate student loans and get a lower interest rate overall. My federal student loans are fixed around 6.5%. Would a private sector bank be able to offer say 5.0% or even 4.5% fixed like they do on houses?

[disneysteve]

There are student loan consolidation programs that may be worth looking into. Some things to keep in mind:

Not all loans are eligible for consolidation.
You obviously don't want to consolidate unless it lowers your interest rate.
Avoid consolidating if it extends your repayment period unless you are unable to handle the current payments or you are positive you will make the larger payments needed to still pay off in the same period as the original loan.
Unlike a house that you can refinance as often as you'd like, you can only consolidate student loans once.

[DRILLINDK]

I was able to consolidate with a private bank about two years ago essentially taking my interest rate from 8.5% on my federal loans to 5.9% with the bank. Shop around and go to local banks, not big national banks.

The federal consolidation program that they have available just take the average interest rate of all your loans. Not really a good deal, just makes your repayment more convenient.

[jteezie]

Thanks DR.

I think you gave me the piece of information I was missing. I should shop around with local banks as they might actually be able to lower my rate. Most of the information online was too broad and nonspecific to my goal "how to take advantage of the lowest interests rates in my lifetime by consolidating."

Thanks for the tips Steve. I'll have a lot of time to shop around as I'm currently in interest-free deferment (all loans) through 2013. I'm trying to let inflation eat at the principal while keeping this "installment" line of credit open as long as possible, actually because I don't intend to buy a car or house on installment credit. Perhaps my understanding of FICO scoring is incorrect?

[Eric80]

You will probably need to talk to a financial planner to see which of your loans can be consolidated. It seem like a great idea because like you said interest rates are low at the moment and why not try and take advantage of that.

[Frugal]

Why would you be able to defer your loans through 2013 if they are standard federal loans? Just curious. It was my understanding an unemployment deferment lasts six months at a time, and then there are other ways of forebearance/deferment on the loans, as well.

[jteezie]

I'm a graduate student. Going back to school and military service are entitled to longer term deferrals. I remember when I went to Iraq, I got 2 years of deferment even though I deployed only 1 year.

I've found that going to school is good way to arbitrage interest rates to make money, although my situation is quite unique. So it works for me because military benefits and my current employer pay for my education. In addition, I can request the deferment which allows inflation to reduce the real principal owed. I keep the full principal invested so I can pay it off at any time, but because I have fairly low rates and I anticipate higher inflation in the future, I choose to keep the balances as long as possible.

[chrisgayle]

Student loan consolidation can give the borrower to combine multiple loans into one loan. Instead of paying multiple payment , it provides single monthly payment, there by increase the total cost of repaying your loans.

[chrisgayle]

Student loan consolidation can give the borrower to combine multiple loans into one loan. Instead of paying multiple payment, it provides single monthly payment, there by increase the total cost of repaying your loans.

[fantot]

There are student loan consolidation programs that may be worth looking into. Some things to keep in mind:

Not all loans are eligible for consolidation.
You obviously don't want to consolidate unless it lowers your interest rate.
.....
.

Not all student loans consolidation is good for you.

[naomibatac]

I agree with fantot, before you consider consolidation; evaluate the pros and cons carefully and choose one that is less burdensome for you.