Consolidating consolidated student loan
While loan consolidation can sometimes dramatically lower a borrower’s monthly payments, Kevin Walker, co-founder of the college finance site Simple Tuition.com, says it can also cost you.“The downside of getting a lower monthly payment is that you’re going to subject yourself to substantially more interest charges over the life of the loan,” he says. Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks. Along with gaining a new degree, many graduates will also leave campus with new student loan payments they’ll have to fit into their post-graduate budgets.Instead of making multiple payments to multiple lenders, the borrower only has to pay off the new consolidation loan, says Michelle Pezzulli, vice president of operations for Credit Union Student Choice, a student lending service provider in Washington, D. “That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions,” she says.This can be attractive to borrowers because the consolidation frequently results in longer repayment periods and lower monthly payments.
Private loans can typically only be consolidated with other private loans.
Even if your rates seem high, t he Department of Education puts a cap on consolidation loan rates at 8.25 percent.
One major advantage of federal consolidation loans is that borrowers don’t need a stellar credit score to qualify, they can apply any time (even if their loan is in default) at Loan gov, and they’ll always get a fixed interest rate.
And once consolidated, they usually have variable interest rates, O’Connor says. Consolidating private student loans when interest rates are low (like now) “could potentially save thousands of dollars.” It also means your interest rate can fluctuate higher as the years tick by.
Unlike federal loans, it can be trickier to get your private loans consolidated.It also means if you’re a new grad with little credit history, you might need a co-signer to be eligible.If a co-signer is necessary, O’Connor says borrowers should ask if there’s a co-signer release option after a certain period of time.Almost all types of federal loans can be consolidated.