FedLoan Consolidation "Special Offer"?

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Has anyone gotten this email? If so, are you going ahead and doing it or is there a better option for consolidating?

Looking to save money on your student loans? A Special Direct Consolidation Loan is the answer

Take action and apply today before it's too late; do not miss out on a 0.5% SAVINGS on your interest rate!
Apply before February 15th to avoid any potential processing delays!

Hurry before this short-term offer ends!

Consolidation is what you do after you're done with school. You don't get in-school deferment for consolidated loans. So ignore this stuff until you're a 4th year.

Originally Posted by DrMidlife

Consolidation is what you do after you're done with school. You don't get in-school deferment for consolidated loans. So ignore this stuff until you're a 4th year.

Ok so I can count on consolidating years down the road? Consolidating it now, before I'm going to start paying, isn't going to matter? It won't help reduce accruing interest or anything?

Originally Posted by MedPR

Ok so I can count on consolidating years down the road? Consolidating it now, before I'm going to start paying, isn't going to matter? It won't help reduce accruing interest or anything?

You can't count on anything down the road, no. Consolidation used to mean you could take your entire medical education's 6% loans down to 3% once you graduate. Now consolidation just means you get to remember fewer bills, and maybe save a teensy bit of interest. In five years it might mean something else entirely.

If you are carrying loans into med school, and you can't make payments during med school, then you need to defer payments during med school, during which your loans accrue unpaid interest. Consolidated loans can't be deferred.

Thus consolidation means you're paying interest, not accruing it. The only interest accrual in consolidation is what accrues between monthly payments. By contrast, usually accrual means the interest you're not paying on 6 figures of student debt during med school.

Best of luck to you.

Originally Posted by DrMidlife

You can't count on anything down the road, no. Consolidation used to mean you could take your entire medical education's 6% loans down to 3% once you graduate. Now consolidation just means you get to remember fewer bills, and maybe save a teensy bit of interest. In five years it might mean something else entirely.

If you are carrying loans into med school, and you can't make payments during med school, then you need to defer payments during med school, during which your loans accrue unpaid interest. Consolidated loans can't be deferred.

Thus consolidation means you're paying interest, not accruing it. The only interest accrual in consolidation is what accrues between monthly payments. By contrast, usually accrual means the interest you're not paying on 6 figures of student debt during med school.

Best of luck to you.

That's very good to know! Thank you for the advice.

Originally Posted by DrMidlife

You can't count on anything down the road, no. Consolidation used to mean you could take your entire medical education's 6% loans down to 3% once you graduate. Now consolidation just means you get to remember fewer bills, and maybe save a teensy bit of interest. In five years it might mean something else entirely.

I don't know what you are referring to with this statement. I don't know of any time where you could reduce your interest rate that much. There were some incentives at where 1% interest or 3% principal reductions but this was only after a number of on time payments. Otherwise it is the same as now, which is combining your loans to the weighted average of all the interest rates.

I think you are referring to the Special Direct Loan Consolidation (http://studentaid.ed.gov/PORTALSWebA...solidation.jsp).

The deadline for it is June 30, 2012. It is a good option to use. The benefit is you will have a 0.5% reduction. There is nothing else out there that will give you this benefit.

Once you consolidate, you loose your grace period. But your consolidated loan will not go into repayment as long as you stay in school. Once you graduate it will immediately go into repayment, and what you do then is apply for IBR.

Originally Posted by DrMidlife

Consolidation is what you do after you're done with school. You don't get in-school deferment for consolidated loans. So ignore this stuff until you're a 4th year.

Special Direct Loan Consolidation will affect your undergrad loans. You can consolidate while in school.

What you are referring to is the Direct Loan Consolidation Program (http://www.loanconsolidation.ed.gov/), and that is done after you graduate to pull together all your government loans into one.

Originally Posted by Igor4sugry

Special Direct Loan Consolidation will affect your undergrad loans. You can consolidate while in school.

What you are referring to is the Direct Loan Consolidation Program (http://www.loanconsolidation.ed.gov/), and that is done after you graduate to pull together all your government loans into one.

Sigh.

My point is that you have to make payments after a consolidation. No more in-school deferment.

If making payments during med school is a reasonable possibility, then by all means take advantage of the 0.25% reduction in interest by doing special consolidation.

If you can't make payments during med school, don't consolidate. The monthly payment on a 6.8% loan is very roughly $100 per $10,000. It's disturbingly common for students to carry $50k or more in undergrad debt into med school.

Best of luck to you.

Originally Posted by DrMidlife

Sigh.

My point is that you have to make payments after a consolidation. No more in-school deferment.

This is not true for the special direct loan consolidation (since you keep the terms of the prior loans including the deferment possibilities). You can't consolidate any loans that never made it into repayment but your undergrad loans should qualify. They would then go back to deferment status.

The regular direct loan consolidations also do not exclude the possibility of deferment. Just check the loan consolidation.ed.gov website

I'd love to be completely wrong on this. My (overly) strong statements are based on finding out late in a consolidation attempt this spring that deferrals are off the table - Sallie Mae was the lender before & after. Let's hope mine is an outlier anecdote.

Originally Posted by DrMidlife

I'd love to be completely wrong on this. My (overly) strong statements are based on finding out late in a consolidation attempt this spring that deferrals are off the table - Sallie Mae was the lender before & after. Let's hope mine is an outlier anecdote.

Perhaps there were talking about the economic hardship deferment that people used to use during residency. My consolidation loans both would qualify if I actually returned to school.

I don't see why one couldn't use IBR while in school rather than deferment if it wasn't an option. If you have no or little income while in school then there's no reason you shouldn't qualify for a very small or 0 IBR payment while in school. Then, while in school, your IBR payments are actually counting towards your 25-year payback.

OP: For the record, several government programs that make repayment easier will only apply for "direct" loans, ie loans that (regardless of the loan servicer) are owned by (the money is owed to) the US federal government (not to be confused with the private loan servicing company, FedLoan Servicing).

For instance, Public Service Loan Forgiveness is, I believe, only available for direct loans.

The "Special Direct" Consolidation Offer is primarily intended to convert your privately-owned debt into government-owned debt, IMO. If you have any non-direct loans (most likely Stafford, be they subsidized or unsubsidized), this offer may be able to make them DIRECT loans, thereby making them eligible for these programs.

Hope this helps!