Student Loan Questions

[marylou]

The other day somebody mentioned that consolidating all your student loans into one loan was more cost effective. Is that true? I thought loan consolidation was always a bad thing?

DH has 4 loans with MOHELA - should we look into consolidating them?

Also, people always mention paying off loans individually. I can see the balance on each of these loans, but I can't figure out how to direct payments to individual loans. One is only $547. I'd love to pay it off -- can somebody tell me how to do that?

[Susie]

Consolidating isn't inherently good or bad, it's about the interest rate. If you have a loan at 2% and a loan at 5%, you probably don't want to consolidate them because then you'll end up with a larger loan with a weighted interest rate between 2-5%. It dilutes your efforts to pay the chunk at 5% off, so you end up paying more interest over time. If you have several loans with the same interest rate, it might just uncomplicate your life.

MH has 4 loans w/ Mohela too, all pretty small. One's barely $1k. There's no real benefit to consolidating because they all get paid on the same bill anyway, and I'd just as soon preserve the option to snowball them. They have <3% interest rates so we have not touched them.

We have his Mohela loans on automatic monthly payments. I'm just looking and the online payment option doesn't seem to let you pick which loan to apply extra principal to. If you go to payoff calculator though, you can pick one, get the amount if you pay it off on a certain date, and they give the info on where to send a check. They say add 5 days for mailed checks. Other than that, call them and see if they can help.

[pamela]

If you consolidated back when rates were insanely low, it was a great thing. Now, it's not necessarily a win. It does simplify things so you don't accidently miss one payment in a long list.

My coworker has MOHELA loans and complains that the new system doesn't let her allocated which loans gets what part of the payment. Apparently if you mail a check you can specify, but not with auto-pay or on the website.

[marylou]

Thanks ladies, very helpful! I'll just leave them as is for now and give them a call after the holidays to see about paying off the little one.