Question about federal consolidation

[chichi52]

Hey all,

Quick questions. I have several stafford loans ~160k with varying 5.5-6.8 interest that I took in medical school and a perkins loan that totals 9800. I plan on doing REPAYE.

1)Do those 4-5 Stafford loans (interest rate changed every year) get lumped into one payment by my servicer for my REPAYE payment or do I have to consolidate them?

2) I was planning on consolidating the perkins loan into a federal direct loan. Do i just consolidate it to one of the staffords or will I need to consolidate all of the staffords?

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[RangerBob]

Hey all,

Quick questions. I have several stafford loans ~160k with varying 5.5-6.8 interest that I took in medical school and a perkins loan that totals 9800. I plan on doing REPAYE.

1)Do those 4-5 Stafford loans (interest rate changed every year) get lumped into one payment by my servicer for my REPAYE payment or do I have to consolidate them?

2) I was planning on consolidating the perkins loan into a federal direct loan. Do i just consolidate it to one of the staffords or will I need to consolidate all of the staffords?

As long as your loans are with the same servicer, you make one monthly payment that will cover all the individual loan monthly payments (in a sense, you can view that as your loans being consolidated)

You can consolidate as many or as few loans as you want. Consolidating your perkins loan into the direct loan program makes sense if you want to take advantage of REPAYE. Your Stafford loans should all be direct, so there'd be no need or benefit to consolidating them, unless they're with different servicers or for some reason aren't direct loans. But even if they are with different servicers, if you just fill out a PSLF "tracking form" then all your loans will get moved to FedLoan. I think you have that option when you consolidate as well--you can check a box saying you're consolidating your loan into the direct loan program for purposes of PSLF and that FedLoan will then take over all your loans.

 

[chichi52]

thanks for the great answer, that helps. I would probably just consolidate it to one of the lower interest rate staffords and keep the same servicer. Any advice on timing of consolidation? Should I wait a few months (repayment starts 9/2016) so that I don't lose my grace period by consolidating?

 

[RangerBob]

thanks for the great answer, that helps. I would probably just consolidate it to one of the lower interest rate staffords and keep the same servicer. Any advice on timing of consolidation? Should I wait a few months (repayment starts 9/2016) so that I don't lose my grace period by consolidating?

Unfortunately consolidation doesn't quite work that way--you can't consolidate it to the rate of one of your lower rate loans. The interest rates get weighted and averaged and then rounded up the nearest eighth of a percent. You then lose the ability to pay off higher interest rate loans of course, which may not matter if the rates differ by 0.2%, but if the difference is between a 6.9% Stafford and 8.5% GradPlus (that was the GradPlus rate before they became direct GradPlus loans), then it's a bigger deal.

Timing on consolidation would depend on whether or not you've consolidating everything. If you were, I would personally consolidate as soon as my loans were no longer in in-school status (you can't consolidate while they are). You lose your grace period, but then you get an extra few PSLF-eligible payments. If you don't plan to aim for PSLF, then it doesn't really matter--who cares about an extra few IBR/PAYE/REPAYE-eligible payments because that's 25 years in the future and those programs could change as well. Plus you should really have your loans paid off by then. And those programs are taxable, whereas PSLF is not. But there are plenty of threads that go into arguments over loan forgiveness...

If you're only consolidating some of your loans, you could start the process around October as it takes about two months for the consolidation process to go through and your grace period for your other loans will end in Dec--this way you can hopefully start repayment on all loans at the same time.

If your repayment starts in September (I'm not sure why it would--do you graduate in March?) then I would just consolidate 2-3 months prior. Remember it takes 2 months for the consolidation process and then you probably make your payment a month after that, but there's a margin of error of +/- 1-2 months...

 

[Igor4sugry]

Hey all,

Quick questions. I have several stafford loans ~160k with varying 5.5-6.8 interest that I took in medical school and a perkins loan that totals 9800. I plan on doing REPAYE.

1)Do those 4-5 Stafford loans (interest rate changed every year) get lumped into one payment by my servicer for my REPAYE payment or do I have to consolidate them?

2) I was planning on consolidating the perkins loan into a federal direct loan. Do i just consolidate it to one of the staffords or will I need to consolidate all of the staffords?

Have you thought of doing private loan consolidation for some of your loans?
LinkCapital and DRB consolidate with residents. Then as an attending you can reconsolidate again to get a better rate.
http://whitecoatinvestor.com/first-republic-bank-student-loan-refinancing/

 

[chichi52]

In the process of getting a quote now. I would only do it if I could get the low monthly payment. If I can't get the low monthly payment, I may as well get the interest break from REPAYE ($1000/mo) or just take the interest hit with IBR and married-file-sep.