posted
I'm getting harrassed by this company to sign up for a student loan consolidation with them. Because one of my loans is a federal loan (all the others are from private lenders) he says I qualify for this special zingy FELP consolidation...or something like that.
I'm not going to actually graduate until August and hopefully I'll have a job in September, so I haven't thought about it yet. He claims that in the next couple weeks the interest rate is going to double (from 3% to 6% or something like that.) Does any of this sound right to anyone or is this guy just another salesman? Do I need to get on the interest rate in the next two weeks?
I always thought that it I couldn't consolidate until after I graduated...so I'm a bit confused. It also doesn't help that I'm a complete and total dunderhead at all of this stuff. I really need to get better at it.
edit: I changed the subject so that it now is obvious that I'm the one that needs help!
posted
I used to process loan applications for consolidating federal student loans. It was a long time ago, and I didn't work with that particular program, but my gut says it's a scam and don't do it. Besides, consolidation is a useful tool to keep on hand in case you ever get behind on your student loans... if you ever default, you can consolidate and have a fresh start, in good standing, with deferrals and forebarances back again.
(Not saying that you'll ever default. But unexpected things happen, and people end up in jams. And if it does happen and you've already consolidated, you have no options.)
Oh, also, with student loans you have a grace period after graduation before you have to start paying them back. Will the consolidation lose that for you? It will certainly lose the deferrments and forbarances you're entitled to, and I would never recommend someone do that.
So yeah. Don't do it.
Posts: 7954 | Registered: Mar 2004
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Should I put any stock in what he's saying about the sky-rocketing interest rate? That's the scare tactic that he's using and it's kind of...working ermmm. I mean worrying me.
posted
Narnia, also, when you get a teaching job, check and see if you can get credit on your loan. When I worked with ED adolescents, I had quite a bit taken off. It has changed quite a bit since then, but check anyway.
Posts: 10890 | Registered: May 2003
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posted
Interest rates go up and down. That's the nature of things. They are probably going up now, but they won't stay up forever. But that's only relevant if you're going to consolidate... what rate are your loans at now? If your loans are at 5% and he's offering you 3%, and you have a lot of loans that you expect to take a couple of decades to pay off, then yeah, it might be worth it. If your loans are at 3% already and the only benefit to consolidation is to go down to just one payment, it's not worth it.
Remember, he's not offering you this out of the goodness of his heart. He wouldn't be doing it if he wasn't planning on making money. And that money he's planning on making? It's yours.
Posts: 7954 | Registered: Mar 2004
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posted
Ooooh, an excellent point, Elizabeth. I forgot about that. You might lose out on any programs like that if you consolidate, too.
Posts: 7954 | Registered: Mar 2004
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posted
I'm just terrified that I'll end up like my brother who's stuck with an 8% interest rate that he can't seem to change...cause he consolidated. I have one loan through Direct Loans (federal) and the rest are through Sallie Mae, so I'm probably dealing with two different interest rates. I suppose I'd better find out what they are.
Actually, the thought of NOT consolidating hadn't occurred to me simply because of two different lenders. I'll be paying two bills, so I thought I would need to put it all into one bill...but it doesn't sound like that's what you mean Eljay.
See? I told you I was a dunderhead.
Posts: 6415 | Registered: Jul 2000
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posted
Do you know what circumstances you can get a break for, ElJay? It isn't just teaching, but many social work kinds of jobs, too.
Posts: 10890 | Registered: May 2003
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posted
Anyone who says that he KNOWS or it's a SURE THING that interest rates or real estate prices or the stock market is going up - and how HIGH - is fooling either you or himself - or both.
I remember early in my freelance career when I ghosted a book on leveraging real estate purchases for a guy who already had one hit book. I included a chapter on "what to do if the real estate market freezes or goes down" - basically, strategies for getting out quick.
He cut that chapter out and told me, scornfully, that real estate prices never go down.
Two years later he was bankrupt because - hi-de-ho - real estate prices had dipped a little, but the market had FROZEN. Nobody was buying or selling anything. So all his leveraged property - he actually had to make the payments, and he couldn't, and he couldn't unload any of it, AND IF HE HAD READ MY CHAPTER he would have been better off.
And I knew NOTHING except that markets don't do what they're told. Not even interest rates - the fed seems to control those rates, but only when the trust in the fed is high. If trust vanishes, then the fed just sits there and watches drastically runaway inflation or deflation. You can guide markets, tweak markets, but you can't FORCE markets and no market is a sure thing.
Posts: 2005 | Registered: Jul 1999
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posted
ElJay- this has been a question I never could get a straight answer about, but I think you've answered it - If I consolidate, and go back to school, I cannot continue to defer my loans, correct?
Posts: 862 | Registered: Oct 2003
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posted
Oh, you do NOT need to consolidate! And Sallie Mae is a fine place to leave your loans, no problems there.
There are two benefits to consolidating. One is conveinance... you only have to pay one bill a month. If you hate paying bills, that can be nice. The other is you might end up with a smaller monthly payment, because you're paying a larger chunk of money off over a longer time frame. But this means that unless you get a much better interest rate, you'll actually be paying more, because you're paying it for longer.
If you can afford making payments on both loans, you'll pay more monthly, but they will be paid off faster with less interest total over the life of the loans. I think this is the way to go.
Also, college loans have automatic deferrments and forbarances available, you just have to ask for them... I don't remember which is which, like I said, it's been a while, but basically one of them gives you up to two years, in six month chunks at a time, where you can push the loan back and not accumulate interest on it. The other one you push the loan back, but it still accumulates interest. Some of them are only available in certain circumstances, or to certain professions. (Including teachers!) They're supposed to be used to give you a break, say, in periods of unemployment, so you don't default. But if you consolidate now, you lose them. Wasteful, it's the equivilant of free money.
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posted
Going back to school IS one of the circumstances where you can get an automatic deferrment.
Elizabeth, yes, there are other professions that get breaks, but I don't remember the whole list. It's been about a decade since I did this. But not only are there federal things, some states have their own programs for professions they need... go be a schoolteacher or a doctor in a state that really needs them, and they'll pay a good chunk of your loans for you.
Posts: 7954 | Registered: Mar 2004
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quote: Going back to school IS one of the circumstances where you can get an automatic deferrment.
Even if you've already consolidated? Consolidating takes the power out of the lender's hands and gives it to the obnoxious company you've signed up with, right?
*tugs at Eljay's sleeve like a little kid* Right? O wise and learned loan person? (sorry, you just seem so darned knowledgeable, I'm just assuming you have the answers to all of my questions.) Posts: 6415 | Registered: Jul 2000
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posted
It depends on the consolidation program. Some of them are run through the government, and you still get the benefits. Some of them are through private lenders, and not as nice.
Before you do anything like that, though, you really do need to talk to someone with more current info than me. Posts: 7954 | Registered: Mar 2004
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posted
Just for the record, interest rates on Stafford loans (sub and unsub) really ARE just about the lowest they've been in years, and expected to go up.
(I work in a financial aid office with a guy who's been working with this stuff for the past 27 years.)
By the way, there is a move to make consolidated loans subject to variation in interest rates. Whether or not that'll happen is up in the air. I honestly don't know enough about it to say anything except that it's a possibility according to a person who knows more about student financial aid than any single person should have the right to know.
Posts: 99 | Registered: Mar 2005
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posted
If you decide to consolidate. I would go with Sallie Mae for the consolidation, not some other company. Their rates are the same as everyone else's, and they are pretty up front about everything. So I'd take the loan from the other place and roll it into a sallie mae loan rather than the other way around.
However one of the techniques you have to be aware of when you consolidate, is that they often take what would be a 15 year loan and turn it into a 30 year loan. If you refinance and then keep paying at the 15 year rate, you will actually get your loan paid off in about 13 years and pay less in interest. Consolidating it to the 30 year rate does cut your payments in half, but you do pay more in the long run, if you don't take the initiatve to put a dent into the principle.
Oh yes, and currently consolidated loans *are* fixed rate. Most of the other loans have an interest rate that is tied to prime and is steadily going up. However even if they bump it up a bit every time the Fed meets, I wouldn't get too worried about it, for at least the next year, becuase the changes will be really tiny as far as directly affecting your student loan goes.
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There is something mechanical that's about to mess with student loan interest rates. OSC is right about anyone predicting a short term fluctuation just guessing, but I think there's something in the works because our financial aid office sent an email about something like that:
quote:Consolidation of Federal Stafford Loans is an important topic this year in particular because the interest rate on all Stafford Loans is expected to increase significantly on July 1, 2005. Students who may not have considered consolidation in the past may want to do so now to lock-in a low interest rate while it is still available.
I didn't research it because I don't have any student loans, but it's worth looking into.
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Dag, that is precisely what this company is telling me. It makes me nervous, but now I think I'm going to check into Sallie Mae after what AJ said. The very large majority of my loans are with Sallie Mae, so that would make sense.
But I don't officially graduate until August and part of me wants to hold out and see if I can get some of my federal loan forgiven through a teaching position.
But then, the July 1 thing scares me. Hmph!
I wish I wasn't so challenged where this kind of thing is concerned. I'm a smart person, but when you start talking about interest and the stock market and blah blah blah...it's like my brain turns off. Posts: 6415 | Registered: Jul 2000
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