Consolidating student loans with different interest rates
The interest rate on your consolidation loans is the weighted average of the interest rates on the loans you have now, rounded up to the nearest 1/8 of a percent and capped at 8.25 percent. You can get help doing the math with an online calculator at the Federal Direct Consolidation Loans website.Click on “Borrower Services,” then “Online Calculator.” Interest rates are determined by the federal government and change each year on July 1, so check with a lender to get their take on possible rate fluctuation.Private consolidation lenders, on the other hand, are not subject to those terms and may include variable rates and any number of fees.What’s more, some benefits of a federal consolidation loan, such as interest subsidies on deferred loans, are not available on private loans.In those cases, you may be able to have another go at it.Yes, a married couple can jointly consolidate their loans, but it may not be a good idea.Unlike with refinancing, serialization won’t lock in a good interest rate. You shouldn’t pay origination or any other fees to get a consolidation loan.Most lending institutions, including the federal government, offer both online and paper applications.
When you consolidate, a lending institution pays off your existing balances and replaces them with a new, consolidated loan.
Plus, consolidating could make it impossible for you to have a Perkins Loan forgiven or reduced.
If you can handle your monthly loan payment as is, carefully investigate how consolidating will change the total amount you’re expected to repay.
You may also have access to a new repayment schedule (like an income-contingent plan) that’s a little easier on your wallet.
If you don’t care about the extra cash and just want a consolidation for the simplicity of a single monthly payment, you can use any money you save to pay down the principal.