Does it make sense to transfer my Sallie Mae loans?

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Q: I Have Four Stafford Loans With Sallie Mae – Three are Subsidized and One is Unsubsidized. I Also Have One Student Loan with Direct Loan. I am Considering Transferring the Sallie Mae Loans to Direct Loan. Does it Make Sense to Transfer These Loans?

A: When you say “Direct Loan,” I believe you are referring to the U.S. Department of Education’s Direct Loan Program (http://www.dl.ed.gov), where you can transfer and consolidate your federal education loans into a single, new loan which offers lower monthly payments. Whether or not it makes economic sense to transfer the loans depends on a host of factors, including: how manageable (or unmanageable) your monthly payments are; how many payments are left on your existing loan; the amount of time and interest you are willing to pay over time; and the interest rates on your current loans.

If you have variable rates on those Stafford Loans, it may be helpful to consolidate them in order to get a fixed rate. On a Direct Consolidation Loan, the rate is based on the weighted average of all your combined loans, rounded up to the next highest 1/8th of a percent. Your loan rate can never go above 8.25%. There are two quick and easy ways to see the financial ramifications of transferring/consolidating your loans. You can use this online calculator provided by the Department of Education. Or you can simply call the Department of Ed at 800-557-7392 and a customer service representative will be able to tell you your new payments — as well as how much extra you will pay in interest charges by consolidating.

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