Consolidation advice?

[Anonymous]

I am 21 years old going to finish my last year of college, and I will have 8 federal student loans that will start requiring payments in 12/2019. Would it be wise to consolidate all 8 loans into just two separate federal loans, one for the Sub loans and one for the UnSub loans? Could I stand to save a lot in interest by opting for one large private student loan? Or should I stick with the safety of federal loans and their many forgiveness programs? Any other general advice? Thank you.

14 credit cards (5 store cards and 9 regular credit cards)

8 federal student loans (4 Sub & 4 UnSub totaling 28000 at an average interest rate of 4.5%)

1 paid personal loan from TD for 2000

AAoA: Roughly 2 years

Total CL of cards: 69000 (54000 on regular CC, 15000 on store CC

No lates/baddies

I will be free of CC debt by September, and I was just approved for an AMEX BCE that I will use primarily until 0% APR runs out in 12/2019.

[Anonymous]

I’m curious about this as well.

[Anonymous]

I wasn't aware that consolation can include only part of your loans. You might want to make sure that's actually possible and if consolation takes away any deferment/ forbearance/ forgiveness options. Department of Education has an easy to use chat feature.
All the loans after federal.... Are they also all direct loans? If you had certain other loans you would have have to consolidate to be eligible for forgiveness on the non-qualifying loans.

I think the main question you need to ask yourself is are you 100% sure that you'll be able to make all of your payments, on time, and pay off this entire loan within 20 years. If you're not, I would stay away from the private loan. Even at an average of 4% interest, after decade you start to realize how significant the interest can add up to, especially when it gets capitalized. Keep in mind what the loan will end up being in the end, not what it is now, when considering the private loan. And certain federal loan plans will reduce the interest you pay on some loans (look up details on Income-based driven repayment plans and subsidized loan interest), so you might not even be saving all that much with a private loan.

I recommend the Income-driven plans. They have a calculator on the student aid.gov website. Sign in and plug in your income. The numbers are estimates and keep in mind the payments take into account annual raises people rarely get nowadays so any forgiveness amount will probably be might higher.

Now, imagine if you should unfortunately lose a job or get in a money bind. Your payments can be as low as $0 on an IDR plan, and still count towards the payments needed towards forgiveness. You're not getting that with a private loan.
Another thing to keep in mind is your account age. For many people this is their student loans and the way they split them up actually helps the AAoA. When you consolidate, it will look like one "new" loan on your credit report. It's good to be aware beforehand if this is something that might cause a big point drop.
Lastly, if you decide to do the IDR plan such as the Income-based repayment plan or REPAY/PAYE and you don't have too much income now, I would consider actually starting repayment now. This will knock a year off of repayment until forgiveness. Your payment could also be really low (the calculator can tell you about what your payment will be). If I could go back I would have waived in-school deferment and been in repayment all four years. Even though the interest would start accruing, it's getting forgiven anyway.
Sorry for the rambling. It's too early in the morning!
Hope this gives you some ideas. :-)

[Anonymous]

Personally, I would recommend keeping the Subsidized and Unsubsidized Loans as they are now. In my opinion there are numberous downsides, with few perks. Consolidating loans will assign you a new interest rate (average of current rates on loans). If you keep the loans seperate, you can actually pay down specific loans quicker (pay less interest over the long run). I would recommend not consolidaing them. 

For Public Service Loan Forgiveness, you must make 120 payments (don't have to be consecutive) towards your loans while employed at a qualifiying employer (educational institution, government agency, non-profit, etc.). You can be on Income Based Repayment (IBR) while making the 120 payments. To be honest, I am unsure how loan consolidation affects PSLF.

I have been working in a college financial aid office for 3 years- and have Federal Student Loans myself that are currently enrolled in PSLF.

[dynamicvb]

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@Anonymous wrote:

Personally, I would recommend keeping the Subsidized and Unsubsidized Loans as they are now. In my opinion there are numberous downsides, with few perks. Consolidating loans will assign you a new interest rate (average of current rates on loans). If you keep the loans seperate, you can actually pay down specific loans quicker (pay less interest over the long run). I would recommend not consolidaing them. 

For Public Service Loan Forgiveness, you must make 120 payments (don't have to be consecutive) towards your loans while employed at a qualifiying employer (educational institution, government agency, non-profit, etc.). You can be on Income Based Repayment (IBR) while making the 120 payments. To be honest, I am unsure how loan consolidation affects PSLF.

I have been working in a college financial aid office for 3 years- and have Federal Student Loans myself that are currently enrolled in PSLF.

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For PSLF, they must be consolidated in a William D Ford direct. If you don't have them as that type then no payments you make will count towards forgiveness.

[Anonymous]

"For PSLF, they must be consolidated in a William D Ford direct. If you don't have them as that type then no payments you make will count towards forgiveness."

+1

August: As I said, in order for certain loans to qualify for PSLF you will need to consolidate them (which would lead being unable to qualify for some IDR plans). In order to avoid consolidation, you could exclude the loans that don't qualify, with the possibility of consolidating them after the first loans get PSLF. If course IDR such as IBR for the first and PSLF after consolidation of the disqualified loans would both = 20 years until forgiveness (if there would even be anything left to forgive).

Second you said that someone may be in IDR and go for PSLF. No....you HAVE to be on an IDR plan. This is one of the main reasons that Navient if being sued. They not only let people make payments on loans that didn't qualify, they let them continue making payments on payment plans that didn't qualify.

I also noticed you used "income-based repayment." I think you mean Income-driven repayment. The income-based repayment plan is a type of Income-driven repayment plan. While many people use them interchangeably, there is a huge difference such as the two IDR plans IBR vs Income-contingent repayment. For example, if a PLUS loan is consolidated, it becomes eligible for ICR. Then after 25 years (total payments) it will be forgiven.

I have learned much more about these loans and loan forgiveness even in the short period since I last posted. The websites are often only partially illuminating and the fine print isn't all in one place. For this reason, and the complexity of the options I think it's best for people to sit down and calculate what each option is likely to cost them in the end and what they can afford monthly. Without all the information (income, loan types, loan amounts, etc), I think it can be detrimental to make any one recommendation with certainty.
Just my opinion.

[dynamicvb]

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@Anonymous wrote:
"For PSLF, they must be consolidated in a William D Ford direct. If you don't have them as that type then no payments you make will count towards forgiveness."

+1

August: As I said, in order for certain loans to qualify for PSLF you will need to consolidate them (which would lead being unable to qualify for some IDR plans). In order to avoid consolidation, you could exclude the loans that don't qualify, with the possibility of consolidating them after the first loans get PSLF. If course IDR such as IBR for the first and PSLF after consolidation of the disqualified loans would both = 20 years until forgiveness (if there would even be anything left to forgive).

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I'm not sure about the excluding certain loans. I had two small loans of FFEL type in addition to my direct consolidations. The Department of Ed denied all my payments on the direct loans because of the other two. I had to consolidate everything into direct loans one for subsidized and the other for the unsubs. I'm hoping when I apply again they will then look at my direct payments on the first loans, but its just hope at this point as they said maybe.

[Anonymous]

dynamicvb: You're probably right about no being able to exclude them. The only option left would be to consolidate them (or maybe pay them off first?), which is sad because the ICR payments are much higher and 5 years longer until forgiveness. I talked to someone who was going to try excluding the loans that didn't qualify (you?). I also talked with someone else they refused to do a certain payment plans with because they had two pre-1998 loans... cancelled loans with no balance! Imo Dept of Education is more than willing to pull the fine details about plans and forgiveness out of nowhere because some of the rules are vague enough the final decisions are left up up to interpretation.
Congress recently passed approved educational spending for those who did not technically qualify for PSLP to still be forgiven on an individual basis, first come first serve. This $350 milion forgiveness, TEPSLF, only takes into account being on the wrong payment plan, not having the wrong type of loans. In fact, servicers originally tried to consolidate by putting borrowers on an FFEL consolidated loan instead of direct consolidated loan so they still didn't qualify.
The clock is reset after you consolidate, so there are a lot of horror stories about that, essentially 20+ years to be forgiven. It wouldn't hurt to try though. Good luck and keep us updated.

[dynamicvb]

If you did not qualify for the IBR and that is why you got on the ICR, do a request for The revised paye. I was able to get approved for it and that took the payments down about 400 less than the ICR. I figure pay as little as possible since they already screwed me out of the payments I made already.

[Anonymous]

Dynamicvb: That's good to know! I'm on REPAY too. I hope the plan isn't going anywhere.
I guess it boils down to type of loan. I missed the chart on the loan consolation gov page. The person I know that is consolidating their PLUS loans does not qualify for anything other than ICR.
Thank you for the info.