Consolidating private student loans

April 21, 2005 7:43 PM

I have around $20k in private student loans. I get an ad in the mail about every 10 seconds offering to consolidate my federal loans, but I don't get a lot of information about consolidating private loans.

Of course a google search turns up reams of possibly-shady companies... anyone have any good experience/advice? My loans are all currently with citibank, and while they're at a currently low 5.5% interest rate, they're at the mercy of fluctuating rates. Locking in something low would be handy.

posted by anjiro to work & money (5 comments total)

From what I understand (could be mistaken), private loan consolidation won't give you fixed rates. You can get fixed rates from consolidating federal loans, but private loan consolidation will give you another floating rate (probably tied to LIBOR).
posted by grimmelm at 9:05 PM on April 21, 2005

I went through Sallie Mae and got a low (low!) interest fixed consolidation loan for my federal loans, so I don't know what the private loan rate would be. I can pay online, and they seem alright by me. My suggestion would be to talk to them, and any other consolidators to get the best rate, but I haven't heard of anyone else except Sallie Mae. It wouldn't hurt to call local banks or savings & loans though. FYI - I still get letters to consolidate my loans.
posted by plemeljr at 9:10 PM on April 21, 2005

Sallie Mae, despite their stunningly awful service, can do loan consolidation for really low interest rates — I consolidated all my private school-based loans into one with my federal loans, and it seemed to work out really well until recently...

So talk to them — they could have a solution for you.
posted by Katemonkey at 5:42 AM on April 22, 2005

Depends on the lender. If you got all of your private loans from the same lender, just on different notes, there's no real reason to consolidate them unless you think one of them has a bad rate.

If you have multiple lenders, consolidation will make it a little easier to pay off, but the rate for private loans is never going to be as good as for the federal loans.

I consolidated all my private school-based loans into one with my federal loans

slightly off topic, but hopefully helpful:

Consolidating federal and private loans together is generally a bad idea. You get a much, much lower interest rate consolidating just the federal loans (Stafford/Perkins).

Right now, with Access Group or Northstar (Total Higher Education), you can consolidate at around 2.8, if you do it before June 30. Both of these companies offer incentives for paying by direct transfer from your back -- around .25% reduction. Both also have incentives for making all payments on time for a certain amount of time. With Access, if you make the first 36 payments on time, they drop the interest rate an additional 1%; not sure the exact numbers for T.H.E. This means that if you do direct payment and don't miss one for the first 3 years, your rate will be about 1.5, or half of inflation.

Set up a separate account with someone like ING Direct that will pay you interest. Every month, direct deposit a portion of your paycheck into that account, and make an auotmated payment on your loan. Given the low interest you're paying on the loan, you come out way ahead over the long haul.

You can't do this if you consolidate your fed and private together.
posted by jewishbuddha at 2:30 PM on April 22, 2005

Oops, now that I re-read the question, I see that you only have the one lender, so the first part of what I said isn't relevant. Sorry.
posted by jewishbuddha at 3:06 PM on April 22, 2005