Money Mistake Monday – Thoughtless Consolidation of Student Loans.

Because we are away camping this week, this week’s Money Mistake Monday is a guest post from Paid Twice. If you like what you see here, won’t you consider subscribing to her feed?

Student loan consolidation can be a very beneficial thing. You can take a number of different loans, get them all grouped together at a low fixed interest rate, and make one monthly payment that may be less than what you were paying before. So many people have in the past consolidated their student loans to a very low fixed interest rate, that it is almost assumed when you say that you have student loans, they are at 4% or 5% or even less.

Not mine. And yes, I’ve already consolidated them. No do-overs. Too bad for me.

My student loans are pretty old. I obtained them to help pay for my undergraduate education, so my loans were dated 1992-1995. Because I went right to graduate school from undergrad, my loans were deferred without accruing interest until I finished my PhD in 2001 (I have no loans from my PhD program). When I completed my doctorate and got my loan repayment information, I called up Sallie Mae, and consolidated my three loans from them with my one directly federally funded loan.

No questions asked. No “what are your interest rates?”. No research into different companies I could consolidate with. Nothing. Just “Hey I’d like to make one payment not four, so can I consolidate my four loans please?“.

I had no idea what I was doing. I had no idea why one should and should not consolidate, and it didn’t even occur to me to look into it before I did it. Just “hey, let’s make one payment a month, thanks!”

My loans are consolidated at 7%. It isn’t the worst I could do, but just a year or two later, I could have gotten rates like those 4% you hear people talking about. Maybe even sooner. I don’t know, because I didn’t do any research. Since we’ve just begun aggressively paying off my spouse’s loans (consolidated at 9% in 1997, again, well, oops, but his oops this time) it will be a little while until I can kill off my own badly consolidated ones. But kill them off I will, and stop paying for my own ignorance.

Some lessons end up quite expensive.

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Comments (9)

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  1. Matt says:

    Even badly consolidated debts aren’t that bad… I consolidated my credit card debt only to start racking it back up. That’s the epitome of stupid. I’m glad I grew up a bit since then.

  2. […] (in a “if I had to do stupid things at least they can be good blog posts” way) to have written this week’s Money Mistake Monday at My Two Dollars.  David is off yurting (yes, yurting!) this week and asked a few bloggers to fill in for him, and […]

  3. Dawn says:

    Um yeah right there with you on this one, I graduated in 98. I remember going to some sort of seminar sort of thing where they basically say hey your graduating and you are goign to have to pay those loans off, here his your consolidation paper work. I honesly didn’t think I had any options, I am consolidated at 8.1% and my hubby as well….we call it our college mortgage! UGHHH at 4% they probably would have been paid off by now, oh well you live and learn.

  4. Anonymouse Writer says:

    Have you called Sallie Mae to see if you there’s a way to lower the interest rate? I can’t remember for sure, but I think when consolidated, I only had one loan and they just let me lock in the lower interest rate. Anyway, it may be worth a try!

  5. paidtwice says:

    Um, yeah, they won’t lower the interest rate. Well, for paying automatically and on time they lower it 0.25%. But that’s it. If I had known to ask before i consolidated I might have been able to get the rate lowered but once consolidated, they know they’ve got you, and they don’t care. lol

  6. Mrs. Micah says:

    We’re definitely going to have to get Micah’s consolidated for sanity’s sake. But when we do so, I’ll remember to check for interest rates…most are Sallie Mae anyway, there’s just a couple from undergraduate which aren’t. I don’t know how their rates will affect this.

  7. When I graduate next year I\’m going to search out the best consolidation deal. My loans from my first year are already consolidated but that was a good deal because it locked in the 4.75% interest rate and current rates are 6.8%. Consolidating my loans disqualifies them from the CCRA public interest loan forgiveness though so I might not consolidate them.

  8. michelleh says:

    We have a student loan on our daughter who is currently a freshman. We began paying it back in February of this year. It’s curretnly at 7.75%. My husband and I never had any college loans. We paid as we went – long ago! ha! So we don’t really understand all the details. My question is can you get a lower rate if you only have one loan? Any help would be appreciated!

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