Don’t Consolidate Your Loans Immediately

How refinancing before consolidating can save you money.


Consolidating your federal student loans can make your life simpler by giving one monthly payment for all of your loans. Unfortunately, if you have a mix of high rate and low rate loans, you could cost yourself money if you consolidate before looking at other options like refinancing.


Let’s say you took out both a low and high rate loan during four years of schooling.


consolidation 1


When you consolidate the loans, your weighted average interest rate becomes 5.42% giving you a monthly payment of $1,297. You then refinance your loans at 4.50% which will save $53 a month and $6,451 over a ten-year repayment. By consolidating and then refinancing, you actually receive a higher rate on three of your loans!


If we wait to consolidate the loans that are below our new refinancing rate, it would look like this.


consolidation 2


Since we keep the lowest rate loans, are new weighted average interest rate is 4.30% after we refinance the higher loans at 4.50%. This now saves you $65 a month and $7,826 over the ten-year life of the loan. So just by refinancing before you consolidate, you save an additional $1,285. Not bad for simply switching the order.


The first step when considering refinancing is to get an estimate of what your new rate might be. Go here, and in less than 15 minutes you can have rate estimates from multiple companies.


If you have any questions or would like to get one on one advice, please contact us.


Thanks for your time,










Bulldog Advisors LLC is a registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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