cancel
Showing results for 
Search instead for 
Did you mean: 

Consolidating student loans

Auto Loans for ANY Credit Situation. Immediate Response.
Advertiser disclosure
Highlighted
Frequent Contributor

Consolidating student loans

Hello!
Does anyone know if consolidating the loans into one does anything with your score?

I have 9 accounts and I’m about to consolidate them into one. I’m currently on IDR plan with zero payment since my income is too little right now for any payment. I was about to submit everything until I started reading all the terms and it said something about interest accruing from day one etc etc, something as if it was basically starting the loan date all over again ?
I don’t know, it’s SOOO much info and it’s always so confusing.

I just don’t want this to somehow hit my credit with increased balances all over or if it looks like a “new account” starting? Something that could potentially hurt my score.

I also wonder if it could possibly increase my score since it would show only one account with an “increased balance” instead of 9. Or if my past lates would be put into one instead of 9.

I have to get a personal loan plus a new car within the next month so I have to be careful. If it could help me or NOT hurt me then I will do it now, but if there’s a possibility of it hurting my score I won’t.

Anyone have any experience with this?

-------------------------------------------------------------------------------------------------
EQ 701, TU 685, EX ?
Wallet:
Amazon store $2500(10/12), Cap1 $1500 (10/12), Discover $1700 (11/1/12).
Message 1 of 8
7 REPLIES 7
Senior Contributor

Re: Consolidating student loans

I would recommend against consolidating your loan if you don't need to do it (full disclosure, I have a consolidated loan)

They will close your current student loan tradelines - they will stay on your report for up to 10 years, continuing to contribute to your average age of accounts, and other aging factors in your FICO score.  Any lates or derogatories will also stay on your report, they don't get transferred or removed before the usual 7 year exclusion period. 

A single NEW tradeline will be reported, so you will have a brand new, age of youngest account = 0, 100% utilized installment loan.   While not necessarily a bad thing, it could drop your scores a bit, which will rise back up over time.

 

I usually recommend against consolidation because the math doesn't work out in your favor as long as you keep the tradelines positive.    A lot of positive, old tradelines really help your score a lot.     I don't harp on the utilization as much, because the utilization of installment loans doesn't have nearly the impact as revolving tradelines (credit cards) do.   And if there is a penalty of having loans over 100%, no one's been able to see it (so it's likely small if any at all).   Utilization over 100% on student loans is not uncommon at all.

 

What the interest thing is: all of the interest that is currently on your other (older) student loans that has accrued will be capitalized and turned into principle on your new loan.   That could be pretty unfortunate depending on how much interest you have built up (with 0% payment, it could be significant).  In addition, your interest rate will be a weighted average in your new loan (from your old loans).

Sabii is usually around these parts - and way more knowledgable regarding the impact this may have on any forgiveness options you could have.    I know that changing loans can alter your eligibility for forgiveness, but I am not really well versed in that aspect.

Nov 2019


Garden goal: keep on keepin' on
Usually a faithful practitioner of AZE5or6or7; working on AZE1or2 and grumbling about it.
Message 2 of 8
Frequent Contributor

Re: Consolidating student loans

Oh wow thanks for this info, good thing I decided to ask first! Lol.
I love this forum!

You know I didn’t think anything of it, except that it could help me keep anything that’s being reported to a minimum (after getting slammed with 9, 90 day lates due to some issue with them being reported during forbearance), I figured it would be safer to have only one account verses 9. But If it isn’t going to help me in any way right now (reversing any lates or taking anything off, or making my score any better) I should probably stay away from it. Especially if it’s going to just decrease my score.

The only thing that made me call them today about consolidating was Bc I got a really weird alert from CK about my accounts changing. So when I logged in, it showed all of my 9 student loans with an increased balance of some sort plus some really weird remark about “deferment removed”.
I have no clue what this is Bc I’ve never seen any of it before, BUT it DID show on all 9 accounts and then on top of it showed a 60 point decrease in my scores!!!
When I called fedloan she said she had no idea what it was except that maybe my interest reported and made the balances higher? But why wouldn’t it have done this prior? It’s never happened in all the years I’ve had the loans so I have no clue what it is or what it means. I also don’t know how to fix it, except to consolidate them all. This is the second time I’ve had some HORRENDOUS decrease in score bc of them.

When applying for the consolidation, it told me that my new consolidated interest rate would be around 4.5%. Half of my current loans are at 3.5 and the others are at 6. So I don’t know if that means it would be better or worse in the long run.

I can’t risk anything happening to my score right now unless it’s good. I need to get approved for too many things. If this 60 point decrease reflects on my actual FICO scores I’ll DIE. I don’t even understand what it is!!!

-------------------------------------------------------------------------------------------------
EQ 701, TU 685, EX ?
Wallet:
Amazon store $2500(10/12), Cap1 $1500 (10/12), Discover $1700 (11/1/12).
Message 3 of 8
Senior Contributor

Re: Consolidating student loans


@Sitori wrote:

The only thing that made me call them today about consolidating was Bc I got a really weird alert from CK about my accounts changing. So when I logged in, it showed all of my 9 student loans with an increased balance of some sort plus some really weird remark about “deferment removed”.
I have no clue what this is Bc I’ve never seen any of it before, BUT it DID show on all 9 accounts and then on top of it showed a 60 point decrease in my scores!!!

When I called fedloan she said she had no idea what it was except that maybe my interest reported and made the balances higher? But why wouldn’t it have done this prior? It’s never happened in all the years I’ve had the loans so I have no clue what it is or what it means. I also don’t know how to fix it, except to consolidate them all. This is the second time I’ve had some HORRENDOUS decrease in score bc of them.

When applying for the consolidation, it told me that my new consolidated interest rate would be around 4.5%. Half of my current loans are at 3.5 and the others are at 6. So I don’t know if that means it would be better or worse in the long run.

I can’t risk anything happening to my score right now unless it’s good. I need to get approved for too many things. If this 60 point decrease reflects on my actual FICO scores I’ll DIE. I don’t even understand what it is!!!

It's really good that you called FedLoan.  Check your account (with them and by downloading your file at the NSLDS) to confirm they're still deferred.  I never, ever trust servicers, because they tend towards incompetence (probably because they're covered by the feds and there is no penalty for it).


I would recommend checking your FICO8s somewhere to see how those are shaping up.  I've found Vantage to be really squirrely, particularly with loan utilization where FICO doesn't mind it as much.   If you go to Experian.com, you can get a $1 7 day free trial and pull your three CRA FICO8s & reports.   Experian will also give you the rest of their scores.   You can cancel your subscription by "updating" your account to the free one within that 7 days and not owe them more than the dollar - I usually do it when I'm checking up on something.

I think the weightest average of interest works out not-too-terribly in the end, however, that outstanding interest being rolled into your new principle could have a bigger impact.

And I get you on the number of tradelines - miss one 30 day payment on a consolidated loan, 1 late.  Miss it with your 9 and that's 9 30 days and pretty ugly.   You'll have to decide if it's worth it to you in the end.

But for now, yeah, I wouldn't consolidate until you sort out your other needs.   You can consolidate regardless of your credit score after you're done with the auto loan, you don't need to stress that until later if that's the route you want to take.

Nov 2019


Garden goal: keep on keepin' on
Usually a faithful practitioner of AZE5or6or7; working on AZE1or2 and grumbling about it.
Message 4 of 8
Valued Contributor

Re: Consolidating student loans

+1 everything Calyx said.
I'm not a fan of consolidation either. There aren't as many benefits as they pretend there are.
Your accounts should not be deferred. You are on a payment plan. It just happens to be really low. I've been on the same plan.
If you are on track for forgiveness or even thinking about it, consolidation resets your count! Any interest rate savings you get aren't that much, especially since you could direct extra payments to the higher APR loans if you wanted.
Additionally since you'll be getting a new loan, any disputes you may have or discover with your old accounts become moot. So if you find out they were overcharging on interest, it's too late.
If you're already at or over 100% utilization (or even near it) then your score won't be affected. It's probably just your FAKO that's affected. Additionally while your interest does get updated with the CRAs, it isn't added to your principal while on IDR. You'll never pay interest on an amount higher than your principal.
The best thing to do is to optimize the rest of your score components. Don't apply for new credit, etc. Unless you need it. Your account should she nicely and your score will continue to improve.



Message 5 of 8
New Visitor

Re: Consolidating student loans

I heard about EduLoan Docs. They offer federal loan consolidation assistance by helping former students through the application process and by selecting the best repayment or loan forgiveness plans for their unique situation.

Message 6 of 8
Valued Contributor

Re: Consolidating student loans

I strongly suggest against this.
I don't know what it is but it sounds fishy. Especially when you're taking about such sensitive information. You don't need anyone to help you select that stuff, really. It's all free. The IDR application takes less than 5 minutes. The questions are super easy.
First consolation is usually unnecessary. Most people only need to do it to get forgiveness benefits and you only need to do two loans to do that. There's no sense in getting a new tradeline and closing the ones that usually end up being people's oldest just for a more convenient payment (must common reason I hear). The APR savings usually isn't much, if at all either.
Consolidation will also wipe any existing payments that count towards forgiveness.
The best resource imo if the repayment estimator. It shows what you're payment would approximately be for each plan. Never select for your servicer to pick it; look so the fine print on how they actually do that and why it might not actually be the lowest plan.
The lowest plan can also change from year to year based on circumstance (such as marriage). Things change.
The second best resource Imo is your peers such as on this forum. They can point you to the links and websites to make informed decisions.
Hope this helps.

Repayment Estimator:
https://studentloans.gov/myDirectLoan/repaymentEstimator.action



Message 7 of 8
Senior Contributor

Re: Consolidating student loans


@timtim wrote:

I heard about EduLoan Docs. They offer federal loan consolidation assistance by helping former students through the application process and by selecting the best repayment or loan forgiveness plans for their unique situation.


I just went through their website. 
They are offering to sell me help that the servicer's rep gave me for free (which I could have done on my own if I'd seen this forum first), so I'd DEFINITELY not recommend using them.   

Nov 2019


Garden goal: keep on keepin' on
Usually a faithful practitioner of AZE5or6or7; working on AZE1or2 and grumbling about it.
Message 8 of 8
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.