It's Time To Think About Loan Consolidation

We know you just graduated and you don’t want to think about your student debt. Really. We understand. Sadly, you need to think about it, and you need to think about it before July 1st.

Why? Because that’s when the government recalculates the interest rate for student loans. If you wait, you will have to pay more interest. This would be bad for you. You need to look at your loans and make a decision about consolidation now.

Yes, it sucks. Yes, making important financial decisions is annoying and hard. You have to do it. If you don’t, a cute kitten will die. Trust us. In addition, if you consolidate while you’re still in your grace period, you may be eligible for a rate reduction.

Michelle Singletary, NPR’s personal finance contributor, suggests several resources that will help you learn about loan consolidation:

Direct Consolidation Loans
Project On Student Debt

Why Consolidate?

If you have loans with a variable rate, consolidating can give you a fixed rate. You may also be able to get lower monthly payments (and a longer loan) by consolidating. It’s not for everyone, so please don’t assume that we’re telling you personally to consolidate, but for some people it’s a wise choice—MEGHANN MARCO

Interest Rising on Student Consolidation Loans [NPR]
(Photo: Rob Lee)


Edit Your Comment

  1. natemartin says:

    I need to consolidate my loans. I’ve been out of school for 2 years now, and I haven’t done it yet.

    I don’t want to go with Wells Fargo (who has my loans right now) because they screw up my payments every month. (Every single month they call me because it looks like I haven’t paid. I tell them I did pay, they check, and say oops.)

    Can anyone recommend a good company to consolidate with? I asked my credit union, but they said they don’t do student loans.

  2. marqlet says:

    I would recommend Citibank and the directly with the Department of Education. I pay my student loans directly to the DOE and I pay the PLUS loan my parents got via Citibank. Never any problem with withdrawals etc.

  3. hendral says:

    In order to pay for college, my fiancée had to open up a bunch of private loans that aren’t technically classified as ‘student loans’. Is there way to consolidate private loans and get a fixed interest rate? Last time the interest rate increased, her payments went up over a hundred dollars.

  4. SadSam says:

    Great Lakes is the company my husband used to consolidate his grad school loans at 3.25%. We have had no problems with payments (auto pay online). The only ‘catch’ is to calculate the monthly payment yourself. Great Lakes always says no payment is due and the minimum payment only covers the interest and never dents the principal. So if you go with Great Lakes you have to want to pay off your loan.

  5. protest says:

    @ marqlet

    please tell me how paying off your parents plus loan for you through citibank works, i have been searching for a year for a good way to do that!!! do they offer a special loan just for that purpose?? do you know a phone number?

  6. Schminteresting says:

    Please tell me how to fold a dollar bill into a crisp little shirt.

  7. Schminteresting says:

    In all seriousness, I’m glad I consolidated my loans when I graduated. I was able to get a fixed rate of 3.875%, and a few months ago, having achieved 48 consecutive months of on-time payments, I was granted a 1.00% reduction, bringing it to 2.875%. You just can’t beat that kind of rate.

  8. Schminteresting says:

    Oh, and despite the horror stories, I’ve had nothing but a pleasant experience with Sallie Mae. I could be one of the few, though…

  9. TPIRman says:

    @Schminteresting: In all seriousness, I heartily second your request for dollar-shirt instructions! I was able to dig up this tutorial.

  10. winnabago says:

    I’ve had a mixed bag with Sallie Mae on the consolidation. They have the on-time payment discount mentioned above, but they are actually charging more interest than they tell me.

    The rate that I should have been locked into was in the range of 3.75, and the final average according to their math was 4.50, and no amount of correspondence can change it. With the 1.00% discount, that is 3.5% over the life of the loan, which is great (and much better than I could get today.)

    Their website is also top notch, if I recall correctly.

  11. Fuzz says:

    Geez, you guys have it good in the States. . .Up here in Canada, my wife is paying around 7.5%.

  12. QuantumRiff says:

    I learned one thing the hard way that I wish my school had explained to its students.. If all of your student loans are through the same company, they do not have to “release” your loans to a 3rd party consolidator. Instead of getting a nice low rate last year, I got a “weighted average of my current loans” that was about 2.5% higher than other companies wanted to offer me.. If your in college, please, please please switch lenders for a few terms, then you can go back.. it will be worth it.. (and make sure they are actually different companies.. Wachovia owns a few different companies with different names..)

    I consolidated over 25 years, instead of the normal 10, because I make the same payment as I would if I were paying it off in 10 (there are no pre-payment penalties with mine) and, in case of a major financial problem, I can take a few months and pay the much, much lower rate, so I don’t have to worry about calling them and asking to skip payments..

  13. Booglaoo2 says:

    My boyfriend has been getting letters from Sallie Mae telling him to re-consolidate. Is that even possible? My student loan company, Edfinancial (whom I love), has no information about re-consolidating. Anybody know anything about this?

  14. Schminteresting says:

    @Johnny: &*$%! this corporate firewall and its blocking of all “hosting” sites. I must wait to learn the fine art of dollar bill shirt-folding at home, I guess.

    You rock–thanks for finding the instructions! :)

  15. RonDiaz says:

    Anyone know anything about ELC.


    Their rade reductions seem better than most. I have most of my loans under the variable rate, and one under the new fixed rate. If the rate is going up over 7% I guess I should bite the bullet and consolodate now. Graduating in August hopefully. Oh how I wish to have graduated when some of my friends did @ 2.33%.

  16. Consolidations work like mortgages also, I believe. Thus your payments go towards interest and only towards principal once interest is paid off. Payments over the monthly minimum go towards principal.

    Something I’ve never figured out is whether the interest is recalculated periodically or what. I’ve had my consolidation less than a year but I’ve been paying double the minimum. I don’t get a new statement until my new payment book arrives, so I’m not 100% sure whether I’m actually saving all that much money in the long run.

  17. teh says:

    @natemartin: If you can, I’d recommend consolidating with the government directly ( If you consolidate with a third party, you may loose out on some of the loan protections (grace period, deferment, etc).

  18. synergy says:

    @krylonultraflat: I have a consolidated loan and my payment goes toward both principal and interest with an increasing amount going to the principal as time goes on.

    I consolidated here.