Will I Save Money?
I have school loans ($60,000 + $5,000), Stafford, and started paying back in 1996. I consolidated all but 1 loan with the hope that if the interest rates dropped I would consolidate again. I called my lender and asked if:
- I could consolidate and
- How do I figure out if it will save me money? I have already paid some interest.
They said they couldn’t help me figure that out, but would send me a new consolidation kit. How can I take advantage of the new lower interest rates? Can I reconsolidate? Help, please.
Thank you,
Nancy
Hi Nancy,
The best way to try and figure out if this will save you money is to use one of the many online calculators that are available for student loans. You put in your loan types and interest rates and such and it tells you what your payment will be, your interest rate and how much you’ll pay back total over the life of the loan. Your current loan holder’s website most likely has one.
If not, just do a search for “student loan calculator” and you should find a few. Because you have another outstanding loan other than the consolidation, you are indeed eligible to “reconsolidate.” The bad news is that I don’t think you’ll end up saving a significant amount by doing so. Consolidation interest rates are fixed and calculated by taking a weighted average of the underlying loans then rounding up to the nearest ?th of a point.
Since I’m guessing that it’s your consolidation that has the $60,000 balance, that loan’s interest rate will end up “overwhelming” the lower rate on your $5,000 loan and not reducing the rate at all. Do the calculations though. Interest rates are at the lowest they probably ever will be so if nothing else, you won’t run the risk of having the interest rate increase and you’ll reduce yourself to 1 payment per month in the process.
Hope this was helpful,
Betsy
