So, I just got notified that some of my loans are eligible for Special Direct Loan Consolidation. Here's the page for that:http://studentaid.ed.gov/PORTALSWebApp/ ... dation.jsp
I've been told that this this will take four of my loans, consolidate them, and drop the interest rate by 0.50% (as long as I choose direct debit). I was wondering how the new interest rate was calculated, and the person I spoke to said it's just a straight average, not a blended rate or weighted average. I'm a bit leery of this info- it seems like that wouldn't be the way they'd choose to do it. If it is, I am glad, because that'd work in my advantage in my particular situation. (I have four eligible loans, 3 at 6.8% and 1 at 2.37%). It'd still be advantageous even if it was blended rate because of the drop, but still.
Actually, I just ran some numbers. If they did blended rate, it'd come out to 5.718% (with my balances) and if it were a straight average it'd come out to 5.693%. So barely a change. I suppose their method of interest calculation doesn't matter. It's the 0.5% drop that makes a difference.
Alright, with that issue dispensed with, here's a question- on the application, they give me an option to consolidate a whole bunch of loans- four that are eligible for Special Direct Consolidation, and another six that aren't. I'm not sure how that works.
What advantage do I have to consolidating either the eligible-for-special loans, or all of them? I see a slight disadvantage to consolidating all of them, since some of my ineligible loans have really high interest rates, and I would lose the ability to pay those down first debt-snowball style.
Is it still worth it to gain the 0.5% interest rate reduction on the eligible ones? The 6.8% loans are the third highest, so I would like to retain the ability to pay on them directly- but consolidating them to 5.7% would not change their order in the debt snowball sequence.