Student Loans & The Cost of Procrastination
I needed to call about consolidating my last two student loans before school let out. I didn’t.
I needed to call about consolidating my last two student loans before July 1. I didn’t.
I needed to do this, I didn’t, and now it will cost me more to pay off my student loans.
I finally called, and despite my mistaken notion, it is not possible to add my two unconsolidated loans to my consolidated loan for without changing (raising) the interest rate.
I must now figure out if it is worth it to consolidate them anyways or not. In all my calculations, I either save or lose about $300 in the life of the loan if I consolidate. My monthly payments would be only a few cents lower, but I would have the advantage of sending one check to one place every month.
My current consolidated loan is at 2.875% fixed — it amazes me to have such low interest.
My unconsolidated loans are at 6.54% variable each year — a little more consistent with current interest rates.
My options, at the moment are:
1) Consolidate all loans and end up at 4.125% fixed and send one check to one place.
2) Consolidate the unconsolidated loans together and then have one consolidated loan at 2.875% and one at 6.54% and send one check to one place.
3) Do nothing right now and wait to see what interest rates are going to do next year and send two checks to two places in the meantime. A lot can change in a year for interest rates.
I’m not sure what I am going to do. I find a lot of value in sending one check to one place and so the consolidation offers a lot of benefit. One benefit to having two separate loans is that it would be easier to make additional payments to pay one off sooner. If I consolidate them, either into one loan or two separate consolidated loans, it will be more work to make additional payments (to pay one off faster) and would allow more room for error on the processor’s part.
Current plan of action: nothing, I’m going to mark my calendar to think about this again in October 2006, a month before my grace period ends.
Oh, good news is that I found out that I have about 5K less in school loan debt than I thought. Looks like my networth will get an instant boost mentally though not actually since I never owed as much as I thought to begin with.
mapgirl
August 8th, 2006 17:48
Have you tried calculating your blended rate for the exact balances you have on these loans?
It may help you get a better understanding of how much you can save in interest or monthly payment amounts if you do or do not consolidate.
I never really figured out consolidating my loans. I just kept my head down and paid the student loans off for 9.5 yrs.
Fed rates are holding as of today, but that doesn’t mean they won’t rise or fall in the future.
Donna Jean
August 11th, 2006 17:00
I did all the calculations of the different situations and the rates, amount of interest that would be paid, etc. As I mentioned, the savings rate is $300 if I consolidate everything together. At this point, that isn’t a big enough savings point to make it worth doing. Instead, I’d rather still have at least two separate loans so I can pay one off faster and easier.
Even though it isn’t October yet, I’ve decided on Option 3 - that I will wait until June 2007 and see what interest rates are going to be. Luckily, with student loans, the rate only changes once a year. So, if rates are going to go up — I’ll consolidate the unconsolidated ones; if they do down, woohoo!
This plans just requires that I keep track of interest rates and don’t let things slip away. Seeing how I could have saved more if I had paid more attention before, I’m not as likely to make that same mistake twice.