Student Loans / Consolidation

With the low interest rates we've had lately, you may be getting daily offers to consolidate your student loans. Why are you getting so many of these? And is consolidation a good thing, or is it just a big scam?

It's not a scam, and it could be a good thing for you. If you'd like to learn about this face-to-face, call CCCS on campus for a confidential session with a student loan counselor. You can reach them at 335-3239. They'll explain the whole process to you, and help you figure out whether it'd be good for you. There's no charge to UI students for the meeting.

Briefly, here's why consolidation isn't a scam:

Loan consolidators pay off your debt with the federal government and whoever else you borrowed money from. You'll still owe the money, but you'll owe it to the consolidation company.

Why do consolidators do that? Because they make money. Now that they've bought your loans, they get to keep your interest payments.

Loan buying is not sketchy, by the way -- it's a major part of the financial world. You can find loan products in most pensions and retirement accounts.

So now you know why everyone wants your loans. Consolidation might be good thing for you, too. You can lock in an extremely low interest rate (sometimes under 3%), and often lower your monthly payments.

There are some things to keep in mind, though:

• How much interest will you pay, in dollars? When loans are consolidated, banks often squeeze more interest out of you by extending the life of the loan. So you may have a low interest rate and smaller monthly payments, but your payoff may take longer, and you can end up paying much more than you would have with the original loan. Never go by monthly payment alone.

  You'll need to do a little math to figure out whether a consolidation offer is good for you. The financial counselors on-campus at CCCS can help you figure it out; you can make an appointment by calling 335-3239.

• Since the rate can depend partly on your credit score, you may not be able to get a great rate from a consolidator. Make sure you understand what rate you're being offered.
• You can only consolidate your loans one time. No trying again if interest rates drop lower -- unless you have new loans that were not part of the original consolidation.
• Your lender has to okay the consolidation.

So gather together your promissory notes (if they got lost in one of your moves, or you just didn't realize that they might come in handy later, you can call your lender and have copies sent to you). Check out Sallie Mae at www.salliemae.com and Iowa Student Loan at www.studentloan.org, two of the biggest student loan consolidators, to see what they can offer you. Then talk with the counselors at CCCS, and see whether consolidation is right for you.

Other Topics

Paying Off Your Loan
Consolidation
Other Ways

Contact Info.

Student Credit & Money Management Services
Iowa Memorial Union
Room 203
Iowa City, IA 52242

319-335-3239

E-mail

money-management
@uiowa.edu