Student Loan Consolidation Question

When to consolidate?

[physics]

When is the best time to consolidate student loans? I'm still enrolled in school and have been getting consolidation offers for years. I called a company once and if I remember correctly they told me that if I consolidated while in school I would have to start paying right away! I want to take all of the deferment that I can so should I wait until the 5th or 6th month of my deferment period to consolidate? Or will that be too late? Thanks.

[lawman]

Get you abacus out and see which way will cost you more interest.

[mcavic]

I would wait until you start repaying the loans, and then see if you can get a better interest rate by consolidating. It's never too late, and by waiting until you have good income, you might get a better deal. Or, it might not even be necessary, if you already have a good rate.

Also, remember that student loan interest is usually tax-deductible (even if you don't itemize your deductions), so check to make sure it'll still be deductible after consolidation.

[ronin]

If you can possibly avoid it - even if it seems tempting - don't consolidate. On the whole most people who consolidate to reduce their monthly payments end up getting deeper into debt. You might be the focused exception, but don't count on it.

Work out which one of your loans has the higher amount of interest on it. Pay the smallest amount possible on the other loans and pay as much as you can into the one loan with the highest interest rate to reduce it to zero as quickly as possible.

Rinse and repeat.

I went into debt three times in my life. Once during my first degree, once during a period of postgrad education two years later and once during a period of unemployment / temporary employment two years after that. On each of those three occasions I got deeper into debt and it took longer to pay off the debt. The last time it took me three years to fully get out of debt.

I promised myself I would live within my means and never borrow again. (Including a mortgage).

[mcavic]

On the whole most people who consolidate to reduce their monthly payments end up getting deeper into debt.

True, most people don't need to consolidate. And you probably don't want to reduce your monthly payment, unless you already have a lot of other debt. The only reason to consolidate would be if you can get a much better *fixed* interest rate.

[lawman]

I promised myself I would live within my means and never borrow again. (Including a mortgage).

I like the way you think. I paid cash for my last car, paid off Mrs. lawman's car early, and am trying to pay off my house by the end of the year. If everything goes as planned, I'll end up broke but debt free. :)

[physics]

Thanks all.
With student loan consolidation you supposedly can get a lower fixed rate and from what I've heard the opportunity goes away once you start paying. And it's not just about interest because there is a grace period and I think you lose that when you consolidate (and I need the grace period right now). I just talked with an old college friend who consolidated the month after his grace period and was irked because he could have gotten a lower rate if he consolidated before. But he wasn't sure about what I should do (whether to consolidate while still in school or near the end of my grace period). Anyone been through this scenario lately?

[Webwork]

Read the fine print before signing.

Ask for specimen contracts, what you will be required to sign, before agreeing to anything.

Any company worth a damn will make a specimen contract available, even if there's some small fee for the consumer friendly act.