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ITT: Time value of money- to consolidate or not to consolidate?
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Date: February 8th, 2010 1:53 PM Author: exhilarant peach business firm How do people go about deciding whether to consolidate federal student loans to lower the monthly payment (and pay them back over a 30 yr period) or to just pay them back over 10 yrs at a much higher monthly rate? If I consolidate, the total amount paid back ends up being a LOT more. But maybe inflation, and my increased ability to build equity in, e.g., a house (by having lower monthly loan payments) offsets this? What is the point (the difference in the total amount paid back over 30 yrs vs. 10yrs) at which it doesn't make sense to consolidate? (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14055202) |
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Date: February 8th, 2010 2:37 PM Author: sexy lascivious point therapy consolidate if it will lower average interest rate, but pay back over 10 years anyway (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14055541) |
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Date: February 9th, 2010 11:22 AM Author: exhilarant peach business firm This actually sounds like a pretty good plan. Although the point of consolidating would be to really take advantage of much lower monthly payments. (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14064704) |
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Date: February 9th, 2010 11:41 AM Author: sexy lascivious point therapy you will always have the option of lower monthly payments when you need them - the point is to make sure you pay more than the min. and have them apply all excess payments to principal (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14064845) |
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Date: February 9th, 2010 11:52 AM Author: odious stock car when you consolidate, don't they just do a weighted average of interest rates (rounded up to the nearest 1/8th)? If that's the case, wouldn't the only advantage be a single payment, or ability to participate in IBR if some of your fed loans weren't with Direct Loans or whatever it's called? Back when Staffords were variable, you could also lock in a low, fixed rate. But no more. (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14064908) |
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Date: February 9th, 2010 11:56 AM Author: sexy lascivious point therapy I don't know
If that's true, then it penalizes you to consolidate because you lose the option to pay off the high interest first |
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Date: February 9th, 2010 11:57 AM Author: pale senate fat ankles exactly. consolidation is generally not a good idea if you're just looking for a cost-effective way to pay off your student loans. You should only do it if you need the lower payments now, or if you have other reasons (like IBR with direct loans) (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14064936) |
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Date: February 9th, 2010 11:56 AM Author: pale senate fat ankles titcr. in general, consolidation will give you a slightly higher interest rate. you'll get lower monthly payments, but it isn't worth it unless you need that flexibility. (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14064932) |
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Date: February 9th, 2010 12:56 PM Author: exhilarant peach business firm In the sense that I will be able to afford higher monthly payments, I don't NEED the flexibility of consolidation. But I'm just wondering if my money can be doing more for me if I hold onto more of it every month even if it means owing 33% more for my student loans over 30 yrs. (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14065346) |
Date: February 8th, 2010 1:57 PM Author: Jet house use the npv function in excel (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14055234) |
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Date: February 8th, 2010 1:59 PM Author: exhilarant peach business firm (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14055249) |
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Date: February 9th, 2010 12:36 PM Author: exhilarant peach business firm Another way of asking my question is, if I consolidate and my monthly loan payments are a >$600 less per month (or even ~$800 less, if I repay the consolidated loan on a graduated plan), does the benefit of keeping that money now and investing it in a retirement fund (and, eventually, in a house), outweigh the cost of extending the life of the loans over 30 years (which increases the total amount that will be paid back by 33%)? (http://www.autoadmit.com/thread.php?thread_id=1216479&forum_id=2#14065154) |