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Consolidation Interest Rate 7%

seanerin
Established Member

Consolidation Interest Rate 7%

Hello, 

 

I am looking into consolidating my student loans (these are loans from the 1990s). Currently on studenaid.gov the interest rate for all loans shows as 0% (but I think the actual interest rates are 3-4%). I was under the impression that consolidating loans would lead to a lower interest rate, but on studentaid.gov it shows the consolidated interest rate as 7% if I choose to consolidate. Seems it would be financially unwise to consolidate if that is the interest rate. Am I missing something? If it matters,  my student loans are serviced by Navient. 

 

Thank you.

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Message 1 of 4
3 REPLIES 3
ccquest
Established Contributor

Re: Consolidation Interest Rate 7%

Sounds like your loans aren't at 3-4%, federal consolidation just brings everything together at a weighted average.

Check an old statement and see what they really were.
as of 4/1/21
Current Cards:
Message 2 of 4
LaHossBoss
Senior Contributor

Re: Consolidation Interest Rate 7%


@seanerin wrote:

Hello, 

 

I am looking into consolidating my student loans (these are loans from the 1990s). Currently on studenaid.gov the interest rate for all loans shows as 0% (but I think the actual interest rates are 3-4%). I was under the impression that consolidating loans would lead to a lower interest rate, but on studentaid.gov it shows the consolidated interest rate as 7% if I choose to consolidate. Seems it would be financially unwise to consolidate if that is the interest rate. Am I missing something? If it matters,  my student loans are serviced by Navient. 

 

Thank you.


Consolidation with the same servicer only averages the loans interest, meaning, it literally does not change the interest rate, but it does create a new account (lowering your AAoA) and puts you at 100% util instead of if you had paid it down some or a lot, you start back at 100%.

 

I would never consolidate unless it was to enter a repayment program you previously could not like REPAYE or PAYE, since your loans are so old.

 

 




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Message 3 of 4
Jshepherd04
Established Member

Re: Consolidation Interest Rate 7%

I just completed a Consolidation with my defaulted student loans. They were from 2004 and 2005 and hadn't been paid at all. I got a 2.5% interest rate. My account shows 0% at the moment because of the Covid laws and the account not getting charged interest at the moment.

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