Is it Worth It?
Dear Betsy,
I have student loans for $60,000 and $5,000, and I started paying them 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 again, and how do I figure out if it will save me money since I have already paid some of the interest. They said they couldn’t help me figure that out, but they would send me a new consolidation kit. How can I take advantage of lower interest rates? Can I consolidate again? Help, please.
Thank you,
Nancy
Dear Nancy,
The best way to try and figure out if consolidation will save you money is to use one of the many online calculators that are available for student loans. Input your loan types and interest rates, and the calculator will tell you what your monthly payment will be, including your interest rate and how much you’ll pay back in total over the life of the loan.
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 ⅛ of a percentage 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. It may work out that, if nothing else, you won’t run the risk of having the interest rate increase and you’ll reduce your payment to 1 per month in the process.
Regards,
Betsy
