school loan consolidation
May 20, 2005 10:38 AM   Subscribe

It's the time to consolidate my school loans, or so I hear. My question is have any of you had good/bad experiences with loan consolidation companies? Are there any I should stay away from? With school interest rates at a low, will my payments be the same regardless of whom I consolidate with? I'm looking for pretty much any experience fellow MeFites have with loan consolidation so I don't mess this up.
posted by jmd82 to Work & Money (15 answers total) 1 user marked this as a favorite
My wife consolidated her federal loans with Sallie Mae. Quick, easy, and straightforward.

The private loans don't consolidate, unless you have some odd situation.

Don't go with AES. They're a bunch of useless goons who couldn't find their arses with both hands, a map, and a flashlight.
posted by 5MeoCMP at 10:46 AM on May 20, 2005

Apparently if you're still a student, or if you're not still a student but have some other qualifications (listed here, you can do it through the Department of Education: I don't know if it's better or worse than a private company though.
posted by librarina at 11:05 AM on May 20, 2005

I have AES, and I'll second 5MeoCMP's opinion of them. That said, consolidating is a good idea. Your payment amount will vary a little. Shop around for the absolutely lowest APR. The whole thing is pretty straightforward, don't worry.
posted by Specklet at 11:09 AM on May 20, 2005

I consolidated my loans through Sallie Mae, and like 5MeoCMP said, it's easy and pretty painless. Sallie Mae offers several repayment options: pay interest only for a number of years ( 2 or 4), pay based on income, or pay increasing amounts based on the assumption that your income will steadily increase.

In my understanding, you can consolidate with almost any financial institution that issues loans. Consolidation just means the institution pays of your numerous student loans and re-issues you one loan for the total amount that you owe.

I'm not sure about current interest rates, but when I consolidated 2 years ago, interest rates were so low I basically couldn't go wrong.

Good Luck!
posted by geeky at 11:11 AM on May 20, 2005

What's a good APR right now? I keep getting confused by places that offer .5% off if you set up direct debit, etc.
posted by Coffeemate at 11:12 AM on May 20, 2005

Citibank has (or had) a deal whereby you'd get another .5% point knocked off after a few years of on-time payments. Their website for the thing is Student
posted by OmieWise at 11:14 AM on May 20, 2005

I consolidated through the Department of Education, and it's been great. I'm under the impression that they're much more generous with forbearances and deferrments. I've had a bad experience with my graduate school loan from Sallie Mae, but maybe they're better when you're not trying to take money away from them (they refused to disclose my loan info to the DoE when I was fillilng out my consolidation paperwork, despite my calling and practically begging them to cooperate to make my life easier).
posted by banjo_and_the_pork at 11:33 AM on May 20, 2005

Don't forget you can consolidate for not only a lower APR but a lower monthly rate. I had a variable APR on three Stafford loans through Sallie Mae with an average of 2.5% interest. I had the .25% reward for EFT withdrawl and the 1% reward for 48 consecutive on-time payments. I ended up consolidating to a 4.5% fixed so I could lower my monthly payment from $200 to $75 and extending another 6 years of repayment.

The extra cash now was worth the longer repayment time and interest. Especially since the interest is deductable from your taxes. And Sallie Mae was completely painless after you fill out the form.
posted by karmaville at 11:59 AM on May 20, 2005

My loans came through Nelnet, then I consolidated through them as well, mostly to lock in a crazy low fixed rate (2.75%) and get a break for automatic withdrawal and eventual on-time payments record. I filled out the form online, it was utterly painless and took about 15 minutes, most of that spent gathering the various pieces of paper you need to complete the forms. My payment is about $60 lower than it would have been if you added up the various payment estimates from all the forms, but I consolidated before my grace period was up, so I'm not certain what my payment would have been.
posted by donnagirl at 12:16 PM on May 20, 2005

I went through Sallie Mae and they've been very understanding with me. I fell into a period of non-employment and then another period of not-enough-employment and they were very nice about deferments and new payment schedules and all that.

Granted, the interest still collects on your loan if you can't pay it. But now I'm on more solid ground and I've just put that monthly payment into my budget and that's how it is for the time being.

Anyway, I've found Sallie Mae to be approachable and willing to work with me. My stomach does a flip-flop whenever I see my remaining balance--why why why did I have to take a semester of bowling!?--but they're certainly not as scary to deal with as credit card companies.

Good luck!
posted by box elder at 12:16 PM on May 20, 2005

Don't forget that those x% of your principal forgiven after n payments made on time result in TAXABLE INCOME to you ... when the lenders forgive that amount, they send the IRS a 1099 as if you'd earned that money in cash.

If you owe $40,000, and get a 5% forgiveness, and you're a 25% marginal taxapyer, that's a $600 tax bill you'll owe the IRS.
posted by MattD at 1:08 PM on May 20, 2005

Thanks for all the responses and tips...Looks like I'm going to sign up with Sallie Mae.
MattD: By forgiven, do you mean that they don't require you to pay a portion of the debt or delay the payment or something? Sorry, never carried a CC balance so I'm quite new to this whole repayment thing.
posted by jmd82 at 1:15 PM on May 20, 2005

I did the consolidation with U.S. Department of Education about 10 years ago, and every few years I get a letter saying they've reduced my rate. I pay by direct deposit and I can change the payment date and amount (I always pay more than the minimum) through the online interface. I've been very happy with them.

Luneray may have some comments since she's consolidated much more recently.
posted by matildaben at 1:29 PM on May 20, 2005

MattD: most of the going consolidation deals reduce the interest rate, not the principle, so there'd be no tax bill.
posted by insideout at 3:52 PM on May 20, 2005

Does it make sense to consolidate if I want to lock in the low interest rate without extending the term or lowering the payment?
posted by letitrain at 6:25 PM on May 20, 2005

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