Loan consolidation

[pharmacy7424]

For experienced persons:
I have many student loans at varying principals and interest rates.

I was under the impression that the total monthly interest paid would be the same whether I consolidated or not, because consolidation takes the weighted average of my loans into determining the consolidated interest rate.

However, my loan provided told me that 'the total monthly interest payment may be higher once consolidated.' How would this be possible?

It is hard to tell if they just said this because they don't want to lose my account if I consolidate.

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[BMBiology]

I got 1.25% taken off my interest rate (1% for paying on time for 6 months and 0.25% for enrolling in their electronic repayment).

I am not sure if you get to keep those interest deduction when you consolidate. Make sure you confirm it first.

 

[Dred Pirate]

I got 1.25% taken off my interest rate (1% for paying on time for 6 months and 0.25% for enrolling in their electronic repayment).

I am not sure if you get to keep those interest deduction when you consolidate. Make sure you confirm it first.

I did on mine - basically if you have different rates they average them, which is not good if you plan on paying more than the minimum - if you pay more - apply it to highest interest loan first, effectively lowering your "average" rate

 

[pharmacy7424]

I got 1.25% taken off my interest rate (1% for paying on time for 6 months and 0.25% for enrolling in their electronic repayment).

I am not sure if you get to keep those interest deduction when you consolidate. Make sure you confirm it first.

When did you graduate? I have not heard of that 1% discount. Is that still available?

 

[sakigt]

They way I read myfedloan.org's info was that the intrest rates were not weighted, ie: 100k at 6.8% and 2500k at 7.9% would be consolidated at 102,500 at an intrest rate somewhere inbetween ie: 6.9%

It would make more sense to consolidate only the 6.8% loans and pay off the other ones faster.

 

[BMBiology]

However, my loan provided told me that 'the total monthly interest payment may be higher once consolidated.' How would this be possible?

Are you paying less per month? since you are paying less, more interest will accumulate and therefore, more of your payment will go toward your interest rather than the principle.

There's no way out of this. Pay it off as soon as you can. You are going to run into "life events" soon like marriage, start a family, buying a house. You don't want to be still paying high interest rate by then.

http://www.investopedia.com/articles/younginvestors/09/consolidate-student-loans.asp

Potential Disadvantages of Consolidating
Depending on the type of loan that you're considering, there may be potential disadvantages to consolidating your student loans including:

• paying more in total interest
• having a larger total loan repayment amount
• extending your loan period, meaning you'll be paying longer
• losing borrower benefits from your current lender (i.e. interest rate discounts,rebates)
• having to repay borrower benefits (i.e. rebates, fee waivers)
• possible prepayment penalties
• loss of grace period (if you consolidate loans during their initial grace period)

 

[sakigt]

Additionally, Ive found there could be benefits if youre in the habit of paying more (which you should be). If I pay off one of my $25k loans my expected monthly payment will drop ~$300 a month, hence decreasing the monthly load that Im responsible for if I hit a "bad month" ie: Out on maternity leave w/o pay.