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Student Loan Consolidation Considerations

July 18, 2011

Back to student loans…so with the incredible amount of student loan debt I have, I’ve been considering consolidating all of my federal student loans into one loan. I had some questions, though, so I started googling. With the amount of money we’re talking, I can’t afford (pun intended!) to make a mistake.

First things first…

Am I even eligible to consolidate my federal loans? Turns out, all you have to have to qualify for consolidation is at least one Direct student loan that is in a repayment, forbearance, grace, or default status.

Which of my loans qualify for consolidation? At this moment, I have 9 separate loans/loan disbursements outstanding. These are a combination of Direct Stafford Subsidized/Unsubsidized, and Stafford Subsidized/Unsubsidized. Because these are all federal loans, they are all eligible for consolidation.

What exactly will consolidation do for me? Several things, WoOt!

  1. Go from 9 separate loans/terms to 1! That means just one payment to make, and one lender to communicate with. Can you imagine trying to keep 9 separate loans and payments straight when it comes time to make out the budget and payments? Oy!
  2. Lower monthly payment! Once the individual loans are combined, the new monthly payment is very likely to be lower than the individual payments would have been together. Now, I can’t say exactly what the original separate payments would total but I believe the minimum payment was $50. By that, the minimum on those would be $50 x 9 = $450. I definitely can’t make a monthly payment like that…
  3. Probable increase in credit score! Now, this part is pretty cool…by consolidating, all of the original loans are paid off which will decrease the number of open accounts on my credit report. I could definitely use some points on the score!
  4. Tax-deductible interest. Student loan consolidation interest is tax-deductible and taken as an adjustment to income. I’m all for lower taxes!
  5. No pre-payment penalty. This is great, because I plan to pay this loan off as soon as I possibly can. A second job will probably come into play here, but I’ll deal with that later.

Will I be able to go back to school before this loan is paid off, or will I have to wait? Yes! If I decide at some point that I am ready to go back to school, I can, and will still have the option of taking an in-school deferment. Yay for still having options down the road!

I found the most informative source on this to be the Federal Direct Consolidation Loan Information Center website. There are many, many companies offering what appear to be private student loan consolidation loans under the auspices of the government. Scary, and I don’t care to get mixed up in that. I’ll be sticking with the federal government on this, as the loans originated with them.

If you’re thinking about consolidation, I definitely think you should see if it might be a fit for you. From everything I’ve read, I believe it is the best option for me and my single income. Finding an option that is manageable and beneficial all at the same time is exciting!

I apologize for the length of this post, but I wanted to share what I found should anyone else be interested in the information. If you want to know more, definitely go to the Direct Consolidation Loans site.

Have you consolidated your loans? Was it what you thought it would be? I’d love to hear your personal experiences with this.

Until next time, folks. Have a Happy Monday!

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2 Comments leave one →
  1. Rosina permalink
    July 19, 2011 1:40 am

    I would like to know if you noticed the date of your information. I just wonder this because when I tried to consolidate my loans with the company I took them out with they told me that I would have to get approved from a private bank and they no longer consolidate due to the economic status of our country. Thanks for the info.

    • July 19, 2011 4:48 pm

      When I talk about consolidating my federal loans, I’m talking about consolidating them directly through the government. The government is the lender, although the servicing company may be a private bank. The Direct Loan Consolidation site is maintained by the the US Dept of Education, so the information should be up to date. I didn’t see anything on the site that would suggest that consolidating isn’t an option right now. (In fact, I believe the government would rather have people consolidate and pay something rather than continuously defer or default.)

      If your loans originated from a private company (ie; SallieMae, etc), they may very well be turning people away for consolidation.

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