When to Consolidate?

[800who]

My girlfriend just "graduated"(pandemic results in no ceremony, but you know.. all done..) she was recently informed that she got a job she applied for and will in the soon future recieve an official offer letter. She's had a Discover card for 1-2 years now and she has about 40-50k student loans broken up into 9-12 loans and I read good things about Discover's student loan consolidations... when would be the best time to do the actual consolidation(in relation to beginning employment)? thanks!

[thornback]

If her loans are federal, she really should consider potential side effects of consolidating with a private servicer.   She will lose the ability to put her loans into forbearance in the future - should employment status change or if life just happens; she'll also lose the various income based payment plans available to federal loan recipients -  reevaluated yearly and capped at (I believe) 10% of income. If her income should dramatically drop at some point, her payments could be $0 without negatively affecting her credit. If anything, do a federal consolidation - not private. 

You'll never know what the future holds -  federal loans do offer some protections that private loans don't. Recommend you both at least look into the pros/cons of such an action. 

That said -  since she's just beginning a new job, i'd say 6 months into employment would be a good time to make that move.  Just so her life/income has a chance to stabilize.  And congrats to her!

[800who]

Only 3 of them are Federal and they're the smaller amounts of the total... the rest are private and higher interest than desired. 

[thornback]

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@800who wrote:

Only 3 of them are Federal and they're the smaller amounts of the total... the rest are private and higher interest than desired. 

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Gotcha.   Then yeah absolutely - consolidating the private loans would be super beneficial.  Whether or not to include the 3 federal loans in that consolidation is the another minor dilemma, I guess - since she'll have private loan obligations anyway, no point really in keeping the federal loans just for the sake of payment protection - so perhaps it comes down to how much $ in interest she could save in doing so, not to mention the convenience of having only a single monthly payment. 

[Anonymous]

Question,

Were the 40-50K student loans split over 9 loans ever deferred or used forebearance?  The reason I am asking is 

if she ever deferred or used forebearance, the interest would of accrued hence the balance of the loan being over

>100% of the orignal borrow amount.  This IMO might make it a little trickier to refinance (Like an upside down car). 

Unless payments were being made, then in that case, I would defintely refianance! 

-AK

[800who]

@Anonymous At first reading that, I kind of thought "... duh.. that's common sense", but after thinking again I never even bothered thinking about it that way... I've never had student loans and am very unfamilar with them... thanks for that information!

[Anonymous]

800who,

Sorry if that came across as an evident item.  For me, I graduated at the wrong time (2007).

So with my deferments and such, it was virtually impossible to consolidate on the private 

loans.  With Sallie Mae or Navient, it is a lot easier for them to consolidate them.  I am only

saying that since It took me 10 years to get below 100% of the original amount.  I'm sure

people are curious... 10 Years?  Yes, from 228K to now 56K.

-AK 

[nmk94]

Keep the Federal loans Federal. As others have said, you lose a lot of protections when you move from Federal to private. Plus there could be partial forgiveness, etc. depending on Congress. I'm not saying count on that or expect it, it's just that you shut the door to it if you move it  out of Federal.

Since she has also private loans, consolidate those through a private lender looking for the best rate (you know this). Just shop around.

Finally, she's graduating now, Federal loans come with a 6 month grace period before payment has to start. Not sure about private.