It has been a long time since I consolidated my student loan debt. Yet still, people make mention of it to me as if it never crossed my mind to do so: “Why are your payments so high? Have you considered consolidating your loans?” … Seven years ago, I graduated from the University of Miami with a double major in Music Composition amp; Music Engineering with a minor in Computer Science….plus, about $140,000 in student loan debt. I spent five years at this $30,000/year (average) school amp; was only able to get about 1/6 of that in grants amp; scholarships (I was too specialized for many scholarships amp; yet, not special enough for others – ah! the conundrum of being a Jacqueline of all trades, master of none). In order to achieve my dreams of education I could only get at UM, I needed to resort to student loans; private loans averaged $15,000/year amp; federal averaged only $9000/year.
At the time of graduation, I was bombarded with “offers” from many different lenders to consolidate my loans. My federal loans, that is; private loans could not be consolidated. All my loans were with SallieMae, “the nation’s leading provider of saving- and paying-for-college programs”, so I decided to keep things simple amp; to consolidate my loans through them. (My very first loan was actually through a different company amp; was sold to SallieMae while I was still in school – something very common.) However, if were to choose now I would have gone with the best Personal Loan Licensed Money lender that is much better than any company or a bank with personal loans. You get much better facilities and payback options.
Then, unexpectedly, I received a packet of payment stubs from some other random company. Some acronym’d company starting with an “A”. My monthly payments for this loan group (I have three with SallieMae) effectively went from around $150/month to over $200/month. Apparently, I received an offer in the mail for discounts, free stuff, what have you. And by “requesting more information”, I inadvertently authorized the sale of my consolidated federal loans to this company from SallieMae. This would not do. Not only were my payments higher, but I now had to pay multiple companies as opposed to just the one. Simple, keep things simple. That is what I want. That is what I need. I immediately began the process of transferring my consolidated loans back to SallieMae.
Consolidating student loan experiences nowadays seems to be stickier amp; even more befuddling. SallieMae has actually suspended their federal amp; private consolidation programs (I guess at some point it became possible to consolidate private student loans) due to “severe legislative cuts made by Congress.” www.salliemae.com/about/find.htm Students amp; parents need to do a lot of research to find the right program amp; lender for them. Even though SallieMae has suspended their consolidating student loan debt programs, they are still worth looking into for their ability to offer low-interest rates. I have friends who got their student loans through traditional banks (e.g. WellsFargo amp; USBank) amp; have interest rates of 12% amp; higher. Whereas the highest interest rate on an individual loan for me with SallieMae is 4.875%.
Be careful of claims made by companies of their interest rates since they are reflective of rates offered to those with good credit. In one company’s FAQ section, they recommended consolidating during the 6-month grace period after leaving school. Their claim is that the interest rate will be lower, but they fail to make clear that that would mean your grace period will automatically end. My suggestion to circumvent those experiences with consolidating student loans is to consolidate during the 5th month of the grace period. That way, the lower interest rate should still apply amp; by the time the first payment on the consolidated loans is due would be when the grace period would have ended anyway.
Another way of consolidating student loan debt is to get a home equity loan to pay off the student loans. This may not be possible for the average student who had to pay their own way through college amp; he does not own a home. However, this could be a very good option for parents who are willing amp; able to assist their child in their loan payoffs. Creativity amp; thinking out of the box will be beneficial amp; www.life123.com has some other ideas on paying off student loans in friendlier ways than the standard that was set decades ago.
There are many pros to consolidating student loan debt: reduce monthly payments, simplify finances, etc. I really can’t think of any generic cons. Just remember, one size does not fit all. And if your credit is less than perfect, make sure you get a customer rep (in every lender you contact) to be straight forward with you as to what your interest rates amp; other payment plan stipulations will be compared to what is advertised.
