private loan consolidation (if married)

[IUgrad]

Hi, everyone,

I have a couple of questions about private student loan consolidation. I took out a considerable amount of private loans while in undergrad/post-bac (as did my fiancé, we both have more than one undergrad degree), and we are trying to decide the best way to consolidate these.

In doing research about this, I read that you can no longer consolidate loans together as a married couple. Is this still true?

Assuming we could consolidate our loans together, if one of us (me) enters medical school in the fall, will the consolidation loan go into deferment, or will he still have to pay based on his income?

Thanks so much for your help!

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[yadayadadude]

I've always heard that it's best NOT to consolidate loans with your spouse, because if one of you - G-d forbid - dies or becomes disabled, you can't get out of the obligation. However, I don't know if this advice applies to private loans. Might just make sense for federal loans.

 

[IUgrad]

Thanks for your response, yadayadadude. That is certainly a consideration, too, since I have a chronic illness. I wouldn't want to strap him with my debt if something happened to me.

The main reason we were thinking of consolidating together is to be able to defer payments while I'm in med school, if that was even possible. It is going to be difficult for the two of us to survive on his salary, especially since we barely survive on both our salaries right now.

It was really stupid of us to take out private loans, and I wish I could take it back. The interest rate is *outrageous* so I need to come up with some sort of consolidation solution for the debt before medical school or that interest will just be compounding like crazy during the next 7-10 years.

 

[Doctor Bagel]

I've always heard that it's best NOT to consolidate loans with your spouse, because if one of you - G-d forbid - dies or becomes disabled, you can't get out of the obligation. However, I don't know if this advice applies to private loans. Might just make sense for federal loans.

This is what I've heard, too, and think it really makes sense for federal loans. I believe most private loans are not discharged with death or disability, though, so yeah, maybe not so much an issue here. Now, I hate to say it, but divorce happens, and consolidated loans might be a problem there.

As for the married thing, it looks like you can't consolidated your federal loans with your spouse's loans after 2006. Since private loans aren't regulated by the federal government, I doubt there's any law saying you can't consolidate them. However, lenders may or may not offer it as an availability. Also, again, since it's not federally regulated, the lender gets to set the general terms, so how deferment works would probably depend on the lender. I'd suggest shopping around and asking lenders point blank if you can get the total loans deferred when you're in school. And make sure it's in writing somewhere.

 

[IUgrad]

Thanks, Dr. Bagel. I appreciate your help.

The reason that I'm looking at this now is that I'm trying to decide between two schools. I like them both equally well, so it really is coming down to a financial decision. The tuition is almost $10,000 more at one school, but the state where that school is located has a program where you can consolidate private loans at an interest rate that is half of my current interest rate. I am not great with finance , and I'm trying to figure out the difference.

How should I do this? Should I do an amortization schedule for each loan I currently hold separately, including my estimated loans for the cheaper medical school, and compare this to my estimated loans at the more expensive school and my loans at the lower consolidated interest rate? Am I figuring this right? Are there any other factors that I should consider?

Thanks for the help, to anyone who is willing.

 

[Doctor Bagel]

Yeah, I guess it's time for detailed interest calculations. I would assume that extra $10k/year would be a 8.5% because it would probably be a GradPlus loan. Also, one good thing is that interest on federal loans, including the GradPlus, isn't capitalized until you enter repayment. I'd suggest taking the calculations out for 7 years since you're to have a minimum of 3 years in residency when you probably won't be paying anything.

I'm going to be pollyannaish here. I know you said you liked both schools equally, but if you wind up liking one school more for a non-financial reason, I'd vote for going there. Once you do the calculations, you'll know how big the difference will be, but I'm not thinking it'll be huge.

 

[IUgrad]

Thanks again, Dr. Bagel! I appreciate your advice.

I'll be brave and try to run the numbers tonight! (Yikes, can you believe I was actually a business major? My concentration was in computers, though, and I avoided finance/accounting classes like the plague. )

Hopefully, this won't be too bad since I found a template on Excel for loan amortization schedules that will do the work for you if you input just a few numbers. Side note: If anyone wants it, PM me and I will send it to you.

I will probably be back with more questions...
Great forum!

 

[yadayadadude]

It was really stupid of us to take out private loans, and I wish I could take it back. The interest rate is *outrageous* so I need to come up with some sort of consolidation solution for the debt before medical school or that interest will just be compounding like crazy during the next 7-10 years.

I don't think consolidation/in-school deferral with help with this problem, because only subsidized federal loans are interest free during deferral. Unsubsidized federal loans accrue interest during school, so it's difficult to believe that private loans don't accrue interest during school too. But I don't have any private loans, so I could very well be wrong when it comes to your specific lender.

As for the $10K v. halved-interest-rate question ... I'm afraid you need to make yourself a detailed spreadsheet with real numbers and crunch away.

 

[IUgrad]

Yes, you're right. The private loans are considered "unsubsidized," and they definitely do accrue interest during school. I only meant that if I consolidated with a lower interest rate at least it wouldn't be accruing quite as quickly/badly.

Thanks for your help!