Question:
I am a relatively recent college grad who is trying to get his finances in order and has a couple of questions on student loans. I currently have ~$32,000 in student loans (most of which has been in forbearance for a year and is scheduled to start payment in Feb.). I am looking at the many different federal student loan consolidation options and am noticing that they are all pretty similar as far as interest rates and eligibility. Is there a "best" lender to use or a "best" deal out there as far as federal loan consolidation?

Is there a website that lists the various loan consolidation packages that each lender has to offer? I have a $32,000 loan and wanted to try to get a 25 (or possibly even 30) year re-payment plan but the longest payment plan I've seen for my amount of debt is 20 years. Does anyone know of a lender that can get me a longer re-payment term? Also, from my time in college, I have a bill on my student account (under $1000 that was mostly room + board fees) that is almost 2 years old and currently in collections. Is there a way to have this bill consolidated into my other student loans, or should I just try and pay it off now? Are there federal (or federally insured) loans out there that would provide me a loan for the purpose of settling my student account and then able to be consolidated into my other loans? I am very inexperienced in these matters and have kind of been avoiding dealing with my debt (obviously), so any help is very, *very* appreciated.

Answer:
The only thing I know is connected to what we just did with Salliemae.com if you consolidate before payments kick in, you get a lower rate, but there is a cut off and you are getting extremely close to it. Also, with salliemae, he got a 4 year lower amount to start off, probably just interest. But he can pay less while he makes less, or should he do well, he can pay more. But at least he will not be strapped with a higher payment should it take awhile to earn a good salary. His consolidation is at 3.6 Without the consolidation his payments would have started in Dec around $159, now they are starting in Feb about $76. I hope you have better luck than I have with the consolidation options. I have $22,000 in students loans. They were all through the same lender.

I don't qualify for any consolidation programs because I used the same lender each semester. I *thought* the responsible thing to do would be to get all my loans from the same place. Turns out that if I had scattered them all over the country, I could get them consolidated and the payments would be lowered from $220/mo to about $150/mo. Yes, I'm bitter. You should still be able to consolidate with that lender. I found this: 'If a borrower has multiple FFEL program loan holders, the borrower may select any consolidating lender and is not required to choose a lender who is the holder of any of the loans. If all a borrower's FFEL program loans are with only one holder, the borrower must check with the holder for consolidation first, unless the lender does not offer income-sensitive repayment.'

So, if the original holder won't let you consolidate, you should be able to take your loans and have them consolidated with another lender? Unless you've already consolidated, I'm thinking you should still be eligible for consolidation. Actually that's what I thought. We had always dealt with American Express and so I thought that meant I had the same lender. But, there were other types of loans that the school included that were subsidized and unsubsidized and I don't understand it, but somehow it meant we werern't all from one borrower. I think the only way you might be all from one borrower is if the school didn't have anything to do with your loan filing and you just went to the bank and took out a loan. Contact http://loanconsolidation.ed.gov/ (this is the federal government's loan consolidation program). I highly recommend using them and no one else.

Why?

1) because you can consolidate if you have at least 1 loan that hasn't "officially" been consolidate - regardless of WHO you obtained that loan through.

2) because they will work with ANY repayment plan - period. If 10-20-30 years are still not long enough - they have a plan that allows you to pay what you can afford (called IRC or something similar) it's based on your income - and if you have paid consistently for 25 years (no deferments, etc) they forgive the rest of the loan amount. Now, they check your income every year and you have to submit a single form every year to stay on this plan but it's well worth it! Salliemae and other companies just can't work with you as well as the government can!

On this particular question, I had the impression that the Department of Education's consolidation allowed for payments of up to 30 years. Note also their income-contingent repayment option. Income Contingent Repayment plan. Do a Google advanced groups search in SCFA for our recent discussions of the tax effect at the end of those 25 years. I posted something on it a few months back, and TabbyG recently did a brief calculation on how it applies to her case. The taxes after 25 years may be crushing. Often true. We're returning to a more socialistic era. I'm sure I've posted something on Aristotle vs. Plato here by now. One thing to note is that with subsidized loans, as I understand it, the government will pay your interest (subsidized interest) should you return to school, say to go on for an advanced degree.

This is regardless of your current income, if they were subsidized when you received them; they stay subsidized unless you consolidate. But, if you consolidate, you loose those subsidies when they are all combined. This may vary from program to program. Check with your lender and consolidation program and report back! I had most of my loans subsidized back when I was in school, and I eventually want to go and finish a graduate degree, so I have "targeted" paying extra on the non-subsidized loans whenever I could, and paid the minimum on the subsidized. I have paid off one of the non-subisidized and I am working on the others until I pay them off, then I will return to school with only the subsidized loans left (hopefully).

The idea being that when I go back for my master's, the gov't will subsidize the interest of my subsidized loans, and I won't be making payments as they will be in deferment since I'll be in school. Otherwise, I'd have to make interest payments, or the interest would accrue on the loan. It doesn't sound like much, but I believe that over the years it would add up, and I'm debt-phobic. Or at least I try to be! So I chose not to consolidate for those reasons. It was a real pain to make those payments at first when I was starting out, so I feel your pain. But I think I made the right choice in the long run. Plus, consolidation means that you are paying for it for longer, and also, therefore, paying more over the life of the loan. Sometimes, however, you just have to do what you have to do, and sometimes even the difference of $70 per month that consolidation could help with can make the difference so you just have to do it, then do it. As a guy who on more than one occaision sold blood in college for money for bean burritos and ramen noodles, I really, really understand.