I spent the last 45 minutes or so consolidating my student loans. I’m a graduate student, working on my Master of Business Administration degree from the University of Phoenix Online. Even though I have these loans, they get paid off as soon as I receive my reimbursement check from my company. However, when I first started the program, I used some of my reimbursement to pay off my higher-interest undergraduate loan.
In any case, I have under $12,000 in student loan debt, even though I won’t have to pay most of that. The two loans totaling that amount have an interest rate of 2.77%. If I didn’t do anything, the rate would probably jump to above 4.0% on July 1. That is the date that variable-interest student loans make their adjustment every year. It’s almost guaranteed that these rates will go up.
If you consolidate now, you can lock in your lower variable rates. In most cases, the consolidating bank will determine the weighted average of your interest rates and round up to the nearest quarter point in order to determine the interest rate for the new loan.
I will end up with an interest rate of 2.875% if everything goes according to plan; this is still much less than what the rate would most likely be if I do not consolidate.
The process of consolidation was much easier than I expected. First, I took a look at Affiliated Computer Service’s website, the company that services my current loans. They had some forms that required filling out and sending in. I decided I didn’t want to go through that trouble, because I tend to be impatient and want things processed immediately. Printing out and sending in Adobe Acrobat forms downloaded from a website is so 1997.
I called the customer service line. After about ten minutes on hold, I got in touch with someone. They gave me the number I had to call for College Loan Corporation, the group that owns my loan. I called and waited for another five minutes.
When Brad picked up the line, he informed me that the service is completely automated. He took my information and told me I should expect the forms through email within five minutes. They were there within two, and I proceeded to complete the application online.
The process was painless. The new loan will continue to be deferred while I am taking classes, which is an unexpected bonus. If you have student loans, consolidate now. There are only a few days left before the interest rates increase.
Do you live in a red state? I’m not talking politically. Experian has compiled data from credit reports to determine which U.S. states represent the highest average debt (not including mortgages) per person.
There’s a nifty color-coded chart, as well. The red states have the highest average debt. The New England states rank high… but so does Alaska.
The survey also breaks down the debt data by age. As people grow older, they generally acquire more debt. After age 60, either debt decreases or people with more debt die sooner.
Most people are predicting that interest rates on student loans will go up on July 1. It might make sense for people with these loans to consolidate before the rate increase. I still have a small portion left over from my undergraduate degree but I’ve also begun accumulating a balance from my graduate degree, 90% of which is reimbursed by my employer. Thus, I am thinking about this topic and weighing my options.
According to CNN Money, rates may go up as much as 2.5 percentage points. I’d like to avoid that if possible.
One solution is consolidation of the student loans. There are advantages and disadvantages to consider, however.
First the advantages:
* Paperwork simplification. This isn’t really a big deal to me since I do everything electronically.
* Lock in low rates. Presumably, rates will go up. You can work with the loan consolidator to wait until the night before July 1 and if the rates end up going down, you can consolidate at the lower rate.
The disadvantages:
* No grace period. If the borrower is still in school when the consolidation occurs, the grace period is forfeited and the payments become due immediately. I’m fine with this situation as I’m going to school part time while working full time. Plus, as my company reimburses me, there will be very little I’ll actually have to pay.
* Only one consolidation allowed. Once the loans are consolidated, you miss any future opportunity to consolidate again at a lower rate. In the current environment, I don’t think raets will be lower in the near future.
* Less benefits. Many lenders offer incentives such as several percentage points off interest for making on-time payments or getting decent grades. Consolidation may not offer such incentives.
I’m certain that in my position, I should consolidate at the low rate now and pay off the student loans as quickly as possible while still maintaining a safety cushion of emergency cash.
Many people frown on lending money to family. Doing so runs the risk of hurting otherwise good relationships. In this MSN Money article, Liz Pulliam Weston talks about how to lend or borrow money from family while avoiding the pitfalls. When lending money to family, heed this advice: [click to continue…]
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