Recently I’ve been giving the idea of consolidating my student debt some serious thought. My motivation for this line of thinking is that I have a rather large amount of debt that is spread out and controlled by several different sources. My lender here in Vermont controls the lion’s share of what I owe due to the fact that most of my debt was accumulated when I went to culinary school (by the way, Vermont has great food, but not as many great restaurants as it should have), and the debt from my university days is dispersed between my bank, Sallie Mae and Great Lakes Educational services. Among the problems that I’ve encountered while researching consolidation is that I have both federal and private loans, which can not be consolidated together. I also have to make low monthly payments a priority for the time being and that probably means extending the term of my loans from there current term of ten years each to thirty. And I’ll freely admit that the idea of living with these loans for the next thirty years is frightening and depressing. I fully intend to have these loans paid off in the next ten years, though how I’m going to do that is something that I’ll have to learn as I go; I really just need the burden of the monthly payments reduced as much as possible.
So what would it mean to consolidate my loans? Well, it would mean different things for my federal and my private loans, and I’m hoping that I can find a lender that would be willing to take control of both and give me the favorable terms that I need. For my federally backed loans the best options will probably be to obtain a direct consolidation loan from the U.S. Dept of Education. Which would cover the majority of my debt and mean that I’m making one payment directly to the government (I’m not actually a huge fan of the idea of making the government my primary lender, but I’ve got to do what I’ve got to do in this instance). What I like about this idea is that I would be borrowing directly from the government instead of from a middle man agency like Sallie Mae, I would have a single point of contact regarding the servicing of these loans, and I would retain a degree of the protection that comes from my loans being backed by the government, including some deferment options and subsidy benefits on the government subsidized loans that I have.
My private loans are a slightly different matter. Since they aren’t backed by the government and are instead with private banking institutions, the single most important advantage would be that I would be replacing several loans with a single one. The most important factor to consider here is my credit score, which is the primary determiner of what type of interest rate I might get on a consolidation loan. Since I am currently unemployed, and my loans are all currently deferred anyway, I’m not moving on this for at least a couple of months, but I am going to use that time to research lenders for refinancing my private loans and getting as well informed of my rights and responsibilities as possible.