Should I consolidate my federal student loans, which will end up costing me more in the long run, but which will give me a better chance of receiving Federal student debt relief, if it happens?
Background:
I took out Federal Stafford Loans for my graduate school education in 2007 and 2008. These loans were part of a program called FFEL that allowed for commercial loan servicers (mine is CFNC) to hold the loans. This program ceased to exist in 2010 and all federal loans are now direct loans.
I learned during COVID, that because my federal loans were commercially held, that I was not eligible for any of the CARES relief, even though they are Federal Stafford Loans. This same servicer CFNC gives me a 1.5% interest rate discount because I auto-draft them.
After speaking with Department of Education/Studentaid.gov, it seems that consolidating my loans under the DoE will give me a better chance of receiving debt relief if Biden will get off his ass and make it happen.
BUT if I consolidate, I will lose my interest discount:
*My CFNC discounted rate is currently 5.3% meaning that I will pay off my loan in 82 months, having paid $6k in interest.
*The consolidated rate will be 6.625% that I will pay off in 87 months having paid $8k in interest.
There are no other differences/pros/cons for me, as the current repayment program I use will remain the same, and I'm already just paying in one lump sum every month. So basically the situation is that I'll be paying $2k extra and extending my payoff 5 months for the possibility that I'll be eligible for Federal Student Debt Relief, if it even happens. And because they are graduate student loans, I still may not be eligible. So, do I risk it?
--Assume I have spoken, at length, for many hours of the last few weeks to my current loan servicer, the people at studentaid.gov, as well as a financial counselor, all of whom have laid out the above choices to me.
--Assume I cannot currently increase my monthly payment.
--Assume I am not eligible for any other current relief packages.
Appreciate your help! |
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