Dealing with loans before Deferral

[m-ttl]

I know this might seem like an odd question, but should I look into consolidating my UG loans (which forfeits my grace period) right before I enroll into my program? 

 

From what I understand, I could do this:

 

• Early August: Consolidate UG loans, forfeit grace period, potentially pay a month
• Mid-late August: Once enrolled in my graduate program, send in my deferral paperwork, immediately defer my loans due to being in school 
• Loans are now deferred, but also now all consolidated -- meaning I can choose to make payments while doing my PhD (as little or as much as I want, since they're in deferral as long as I'm enrolled part-time)

I was speaking with a friend about consolidation, but found you can't consolidate while in your grace period or while actually enrolled in school. Since it's the summer, I'm currently in my grace period. 

 

Has anyone done this before? It seems more prudent to only have one loan to pay off instead of the twelve I actually have. 

 

Quick ETA: Though I have a stipend & am fully funded I'm making a big move and am in need of some extra $ for school expenses which was why this discussion came up. I was planning on adding a small starting Grad School loan (from the Gov't and only after I was on campus) to get some of my textbooks, etc since all my income is going towards the move itself. 

Edited May 21, 2014 by m-ttl

[TheGirlWhoLived]

I'm definitely not an expert on this, but what do you see as the benefit? I understand the idea that they are now all one loan, but I've never had a problem with mine being separate. I still do one payment, even though the calculated payment is based on multiple loans. Also, even though I had a lot of loans, they group into subsidized and unsubsidized. So, it's similar to having two loans anyway. I can just pay the amount they ask, or it gives me the option of allocating my payment amount however I want.

This is just my experience, so it may be different if you have a different loan provider.

[m-ttl]

I'm definitely not an expert on this, but what do you see as the benefit? I understand the idea that they are now all one loan, but I've never had a problem with mine being separate. I still do one payment, even though the calculated payment is based on multiple loans. Also, even though I had a lot of loans, they group into subsidized and unsubsidized. So, it's similar to having two loans anyway. I can just pay the amount they ask, or it gives me the option of allocating my payment amount however I want.

This is just my experience, so it may be different if you have a different loan provider.

 

the interest rates usually consolidate but if you're saying they don't then there maybe isn't an option. [my understanding is all the loans are now one principle, and all future interest builds off of THAT as opposed to my four year old loans accruing more interest than my 1 year old loans, but I'm not the most numbers savvy] Basically my loans will go into deferral because I'll be in school so I don't have to pay anything. 

 

I was curious to see if it would be smarter or doable to do this rather than have separate loans. 

Edited May 22, 2014 by m-ttl

[juilletmercredi]

Why would you want to consolidate before school?  You can choose to make payments on deferred loans while doing your PhD even if you don't consolidate - just pick one and hack away at that one.

You can also borrow loans while in grad school and then consolidate them all together when you graduate.  I don't think it'd be more doable or smarter to combine them all ahead of time.

[hj2012]

I'm also no financial expert, but I think it would only make sense to consolidate if you have private loans that won't defer while you're in school, and you think you'll have a tough time making monthly payments on the loans and/or you think you can get a better interest rate by consolidating. As juillet mentioned, you can still work on paying off deferred loans. 

[m-ttl]

Thanks everyone! Just making sure I wasn't missing out on anything. 

[danieleWrites]

Student loans are still loans.

When you "consolidate" a loan, what you are doing is taking out a new loan that pays off the other loans. The interest rates don't "consolidate". You get an interest rate that's set at what the new loan is. Consolidation is good if you will get better interest overall. This can be hard to figure out if you've got a handful of loans at several interest rates.

There are two important words to consider before you go after consolidation: subsidized and unsubsidized. If you have subsidized loans, leave them be! A subsidized loan means that the government pays your student loan interest while your loan is in deferment. If you have unsubsidized loans, you are being charged interest every single month you have that loan. This happens while you're in school, while your loan is in deferment, and even during grace periods. It does not stop until the loan is paid off. Period. At periods specified by your loan contract, the interest is capitalized. This means that the interest you've accumulated since the previous capitalization will be stuck onto the principle and you will pay interest on it, as well. Many a student has thought, gee, I only have 20 grand in student loans! And then the grace period ends and the number suddenly looks more like 26 grand. WTF face is not a fun face to have when you're looking at student loan bills.

You can pay on any loan, even if its in deferment, whether you've consolidated the loans or not, unless you have a loan contract that specifically says you can't. Most financial advisers will tell you to pay your student loan interest every month whether you're in deferment or not. Unless you have subsidized loans, then there's no interest to pay.

Edited May 29, 2014 by danieleWrites

[psychologue]

Related question - I've been paying my loans for two years and can't wait to defer for grad school... when can I? I've registered for the fall term. Do  I have to wait until classes start or can I defer before then?

[maelia8]

You can start the deferral process as soon as you are able to get an official stamp/signature from the educational institution you'll be attending. However, the deferral won't kick in until you actually start classes, as the deferral forms generally require you to list the start date of your program. For example, I'm finishing my current program on June 30th and starting at my new grad school on August 20th, so I will have to make payments for July and August as I won't be enrolled in a program during that time.

[Maleficent999]

The bank that holds my loans says that the school where I'm starting in the Fall automatically transmits enrollments to them and that I don't have to do anything to defer my loans. However, I'm not entirely sure if I believe that so I'll be calling at some point soon.

[mpainter]

I spoke to my bank about deferral for UG loans, and they told me they receive the clearinghouse or official school information, and then any deferral goes into effect 45 days prior to this start date. 

 My bank also told me any money I paid from July and August can be returned to the borrower as that money is no longer required.