Re-Consolidating
Dear Betsy,
I recently read an article that student loan interest rates may go down in the next few months. I received something in the mail last year that said the rates were lower than they’d ever been and that I should consolidate, which I did. If the rates go down again, will I be able to consolidate again to get the lower rate?
Thank you,
Sue
Dear Sue,
There is some speculation that when the student loan interest rates for 2003/2004 are announced next month that they may be even lower than they were this year. The answer to your question of whether or not you can re-consolidate to get the lower rate is a little more complicated than yes or no. You may be able to re-consolidate your loans if you have another loan outstanding that either was not included in the original consolidation or was taken out after your 1st consolidation was completed.
The way consolidation interest rates are calculated, however, it may not be worth it. To determine the consolidation’s fixed interest rate, the lender takes the weighted average of the underlying loans and rounds up to the nearest percent. For example, if your current consolidation loan is for $40,000 at 5.87% and the other loan you’re adding into it is for $2,000 at 3.42%, you would end up with a $42,000 consolidation at 5.87%. If your additional loan was $8,000 at 3.42%, you would end up with a $48,000 consolidation at 5.5%. Not much of a difference.
Many student loan holders offer consolidation calculators on their websites that will help you determine the effects of consolidating or, if you’re eligible, adding other loans to an existing consolidation. Whether the new rates go up, down or stay the same, if you are considering consolidation of any type, I strongly suggest you work the numbers through first.
Good luck!
Sincerely,
Betsy
