When to Consolidate

[ChemGuy]

So, here's the skinny:

I have 4 unconsolidated, federal stafford undergrad loans open with Citibank--one for every year of school.  I decided not to consolidate because I was ignorant of the process in my youth, obviously a bad decision given the historic lows I could have locked in during 2002.  Anyway, I recently decided to pursue a graduate degree and will partially fund this endeavor with additionally Stafford loans.  I have already initiated the loans for this upcoming year and may decide to forgo further loans, though I will qualify for an additional year (I'm pursuing a two-year MBA).  The question is:  Should I now leave all of my loans unconsolidated, or should I now consolidate all of these loans to maximize the impact on my credit score?  In the past, I focused on the fact that consolidation changes the age of the loans, and I was additionally concerned about aggregation of the balances (4 loans with staggered outstanding balances and ages tranforming into one large, new account balance).  But I now appreciate that having so many installment loans--5 open with the addition of this year's--has a negative affect on the credit score, especially since I only have 2 open revolving accounts.  What should be my course of action?

[jesslyn]

The usual rule is that you can only consolidate federal loans once.  So if you consolidate your undergrad federal now, you will not be able to later consolidate them with your grad federal.  If you think the interest rates will go up in the next two years, then go ahead and consolidate now.  If you think they won't be that much higher in two years, wait and consolidate everything then.  I think you should concentrate more on how much the loans cost you money over their life, than their (negligible) impact on your score.

Are you trying to maximize your score just to maximize?  Or is there some reason that you need your scores to go up while you're in school (new house, new car)?  I would find out from a potential lender if it even matters to them.  Student loans count much differently than other installment loans (and different lenders consider them differently), so it might not matter all that much in the end whether you consolidate now or later.