topic Should I consolidate my student loan debt? in Student Loans

Should I consolidate my student loan debt?

Anonymous — Sun, 23 Aug 2020 06:24:42 GMT

I have 11 student loan accounts from Dept of Ed/Nelnet on my CR. The total is about 50k. If I consolidate them, what happens to the 11 accounts already on my CR? Do they show as paid, closed, transfered, etc.

I read somewhere that you shouldn't consolidate because I have 11 accounts reporting positive payments whereas if i consolidate it'll only be 1 positive account.

On the student aid website, it has repayment plans (PAYE, REPAYE, ICR) that include forgiving some of the debt BUT you have to consolidate to apply. Is it worth it?

Pros/Cons to consolidating?

I'm very new to the idea of consolidating debt so I don't know much about it.

Thank you!

Re: Should I consolidate my student loan debt?

Anonymous — Sun, 23 Aug 2020 07:04:02 GMT

@Anonymous wrote:
I have 11 student loan accounts from Dept of Ed/Nelnet on my CR. The total is about 50k. If I consolidate them, what happens to the 11 accounts already on my CR? Do they show as paid, closed, transfered, etc.

I read somewhere that you shouldn't consolidate because I have 11 accounts reporting positive payments whereas if i consolidate it'll only be 1 positive account.

On the student aid website, it has repayment plans (PAYE, REPAYE, ICR) that include forgiving some of the debt BUT you have to consolidate to apply. Is it worth it?

Pros/Cons to consolidating?

I'm very new to the idea of consolidating debt so I don't know much about it.

Thank you!

The closed accounts fall off in 10 years. For me it seemed like no biggie, until this year when all of my oldest accounts (by far!) started falling off amd my scores are taking a hit, but I am also rebuilding. The last of my oldest accounts fall off in October and it was for no real benefit to me, IMO.

It creates a new TL, lowering your AAoA.

If it lowers your interest or gets you into a program you currently do not qualify for (if you do not have direct loans, but FFEL loans through a private servicer, amd want into ICR, REPAY, or PAYE), then that is something to consider.

IBR does not require you to consolidate. ICR, PAYE, and REPAYE do.

Depending on the savings and how much will be forgiven, that is up to you. They jave calculators to play with to show you what it *may roughly* cost and what would be forgiven.

Remember any of the 4 programs (ICR, IBR, REPAYE, or PAYE) take 20-25 years of repayment before the remaining balance is forgiven.

And once closed, they show all of the above "paid, closed, transfered".

Are you already in a IBR repayment plan where you recertify annually? If you are and have been working on it for any period of time and the payments are low or very low, I personally would stick with it because after 20 years the balance is forgiven. My SO has $0 payments and after 20 years of those $0 payments the loans will be forgiven. If you consolidate, I believe the term restarts.

Good luck!

Re: Should I consolidate my student loan debt?

pt91978 — Sun, 23 Aug 2020 09:16:13 GMT

@Anonymous When I consolidated my 6 accounts into 2. The 2 new accounts were added to my report. The other 6 accounts showed closed. Here's a screenshot of what it would say your report if you decided to consolidate your accounts.

Re: Should I consolidate my student loan debt?

calyx — Sun, 23 Aug 2020 18:54:06 GMT

If you consolidate, they will be closed and you get a new tradeline. This will reset your AOYA to 0m, but if you're not getting a mortgage in the next year, that won't matter. If they're closed positively (not in default), they can contribute to your AAoA and AAOA (if they're your oldest) for up to 10 years (or more, I have an account that's been closed for way longer than that just sitting on one of my reports).

Your utilization will be "reset" to 100% for that loan, but loan utilization doesn't have much affect on FICO until it's <9% aggregate, so it's not much.

Honestly, the pros/cons is more extreme for those coming out of default. If it benefits you financially to consolidate and you're not getting a mortgage any time soon (the older "mortgage" models freak out about new accounts - more so than newer models), go for it.

Re: Should I consolidate my student loan debt?

lhcole77 — Sun, 23 Aug 2020 19:13:11 GMT

@Anonymous I recently consolidated mine from 10 loans to 1 loan. I needed to consolidate because of PSLF and 4 of them were held by a private lender. Now the entire loan is considered direct federal so I'm all set.

Saw a 30+ point increase on all three FICO 8 scores after consolidation. I suspect it's because my aggregate loan % remaining went from 100% to 87%. I now have three different types of loans on my report. I hadn't realized that a few of my student loans were technically reporting more than 100% due to interest.

For me, there were zero cons to consolidating. I knew I was always going to. I'm also now 0% interest, deferred payment, and getting credit towards PSLF payments due to CARES Act and presidential executive order.