What Is The Meaning Of Reconsolidating

Your eyes absolutely pop out of your head when you read over your

Loans chart from the National Student Loan Database and you realize

you consolidated and reconsolidated four times! What does this mean,

how did this happen, could you do it again if you so desired, and could

you get a better deal?

This is actually my situation. I consolidated my loans four different

times. The first time was for my initial undergraduate loans. The second

time was to include loans from when I returned to school to include the

remainder of my undergraduate degree. Then I did a mini-consolidation

of two loans right before an interest rate hike was expected in

order to fix the rate—this was before each federal student loan started

being issued at fixed interest rates. The final reconsolidation was right

after graduation for my first master’s to secure one of the consolidation

benefits before they ended in October 2007. I could still reconsolidate

one more time with direct loans, if the current program or a program

ten years from now with direct loans seems more beneficial for paying

off my loan faster.

Why might you want to reconsolidate?

If you decided to work for the government or a nonprofit business,

you could get on a plan where the rest of your loan would be forgiven

after 120 payments while working in a public service position for ten

years. It would also be a good option if you returned to school and

wanted one uniform payment. If you missed a loan and didn’t want to

lose out on benefits earned from a previous consolidation, this is not a

time to reconsolidate—at least until your benefit is earned.

There’s another situation where reconsolidation could be a good

idea: You consolidated before October 2007 with a consolidation benefit

of a 2 percent interest rate deduction after 36 on-time payments

and your new interest rate is secured for the life of your loan. You’d

rather have your consolidation loan with direct lending to make sure

your loan is never sold to another bank.

No matter what your situation is, weigh your options carefully and

reconsolidate when you are able to and when it makes sense for your

individual circumstances.