Consolidating Perkins Now or Wait Until After Grace Period

[fetorius]

I am getting ready to consolidate all of my loans so that I can apply for REPAYE. However, I also have a Perkins loan (5% for ~10K, interest free during the 9 mo grace period).

Would it be better to consolidate the Perkins loan after 9 months or do it now all at once? If I choose to consolidate it after 9 months, will the interest on my other loans under REPAYE capitalize and/or require a new REPAYE application at that time? I am not planning on PSLF.

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[TMP-SMX]

Interest capitalizes when you enter repayment, consolidate, or change repayment plans. Why do you need to consolidate?

 

[fetorius]

Interest capitalizes when you enter repayment, consolidate, or change repayment plans. Why do you need to consolidate?

That's good to know. The estimated payment for the Perkins loan would be almost $300/month so I'm hoping to get it onto REPAYE and decrease that cost while in residency.

 

[SigmaFS]

I am getting ready to consolidate all of my loans so that I can apply for REPAYE. However, I also have a Perkins loan (5% for ~10K, interest free during the 9 mo grace period).

Would it be better to consolidate the Perkins loan after 9 months or do it now all at once? If I choose to consolidate it after 9 months, will the interest on my other loans under REPAYE capitalize and/or require a new REPAYE application at that time? I am not planning on PSLF.

You only have 180 days to add new loans to a previous consolidation. Your Perkin's 9 month grace period is outside that 180 day window. And, I think, you cannot consolidate a Perkins by itself. Please call Direct Consolidation to confirm.

 

[SigmaFS]

Interest capitalizes when you enter repayment, consolidate, or change repayment plans. Why do you need to consolidate?

The reason to consolidate immediately after graduation is to enter REPAYE ASAP by waiving your grace period to benefit from the REPAYE 50% interest subsidy on any unsub interest accrual.

 

[fetorius]

You only have 180 days to add new loans to a previous consolidation. Your Perkin's 9 month grace period is outside that 180 day window. And, I think, you cannot consolidate a Perkins by itself. Please call Direct Consolidation to confirm.

Thanks SigmaFS. Would a worthwhile strategy be to consolidate all of my Direct Loans first, wait 175 days to maximize the grace period on the Perkin's, then add it to my Direct Loan consolidation?

 

[SigmaFS]

Thanks SigmaFS. Would a worthwhile strategy be to consolidate all of my Direct Loans first, wait 175 days to maximize the grace period on the Perkin's, then add it to my Direct Loan consolidation?

Yes, wait until the end of the 180 day period to add the Perkin's. Please be aware it's a paper process. Google 'consolidation add loans forms' to review the form.

 

[lurker291]

SigmaFS, wouldn't it be wise to take advantage of the grace period "loophole" that you speak of and consolidate perkins loans now?

 

[SigmaFS]

SigmaFS, wouldn't it be wise to take advantage of the grace period "loophole" that you speak of and consolidate perkins loans now?

Perkin's is 100% subsidized during the grace period. If you include Perkin's in the original consolidation and select REPAYE, you'll receive a 50% subsidy. So, delay adding the Perkin's, HPSL and/or LDS until the end of the 180-day add loans window.

 

[TMP-SMX]

I'm still not following the purpose of consolidating in this situation. All of the loans separately are eligible for income based payment plans such as REPAYE or IBR since they are all direct loans. The only thing that consolidation does is would have a single payment rather than multiple small payments adding to roughly the same amount. You also round up your interest. If you have no plans of PSLF keep the accounts separate. As said wait until the end of grace to switch to REPAYE. For simplicity just switch payment plans around 6 months though if you really want to delay things apply separately for the accounts between the 6 month grace period and the 9 month for the Perkins loans. In the end, it's not going to make a whole lot of difference.

 

[Student Loan Planner]

I'm still not following the purpose of consolidating in this situation. All of the loans separately are eligible for income based payment plans such as REPAYE or IBR since they are all direct loans. The only thing that consolidation does is would have a single payment rather than multiple small payments adding to roughly the same amount. You also round up your interest. If you have no plans of PSLF keep the accounts separate. As said wait until the end of grace to switch to REPAYE. For simplicity just switch payment plans around 6 months though if you really want to delay things apply separately for the accounts between the 6 month grace period and the 9 month for the Perkins loans. In the end, it's not going to make a whole lot of difference.

Most Perkins loans are for extremely small amounts too, so max if you're debating REPAYE 50% vs 100% subsidy you're saving at most about $150-$300 probably?

That's extreme optimization though so I admire that

 

[rad0nculous]

Most Perkins loans are for extremely small amounts too, so max if you're debating REPAYE 50% vs 100% subsidy you're saving at most about $150-$300 probably?

That's extreme optimization though so I admire that

I just posted on a similar topic.

The OP stated the value of the Perkins loan is $10K. Assuming the interest rate difference between Perkins and the weighted average of the consolidated loan is 1%, this is roughly $100/year of a difference, or roughly $50 for the 6 months he/she would wait before adding the loan, and that's before any subsidy for negative amortization with REPAYE (i.e. back of the envelope calculation would be approximately $25 saved with a strategy of adding the Perkins loan later).

 

[RangerBob]

I would recommend consolidating all loans together from the start. I added a loan to my consolidation loan application one month later (I hadn't realized subsidized loans would remain subsidized, so I added my single non-direct subsidized loan to the application). My servicer added the loan but did not adjust the interest rate to reflect the now-lower rate it should've been. It took a lot of phone calls, and getting the financial aid director at associated medical school involved, who contacted a high-up administrator at the loan servicer to look into the problem. Multiple "supervisors" I had spoken with on the phone did not understand the fairly simple math that showed my rate should have gone down upon adding the loan.

In the end everything got corrected and was made retroactive, but I was lucky to have the time and resources (ie., a bull of a financial aid director) to take care of this.

It would not be worth the minimal savings you'd get from delaying consolidation, in my mind. I don't know how common my situation is, but believe me when I say the simpler you can keep things for your loan servicer with regards to consolidations, income re-certifications, etc., the better.