Using Student Loans to Pay Other Student Loans?

carebear77
Sat, 08 Dec 2012 22:44:17 +0000

I did this with some old federal loans. I had finished a 2yr degree more than 10 years ago, and my interest rates were about 8% fixed. When I went back to school last year, I borrowed new Stafford loans at the 4.whatever% they were. I had enough scholarships/financial aid to pay tuition and expenses, so I simply paid off the old loans with the new loans. There was no reason not to, as the school covered most of the origination fees.

I’d suggest you do a spreadsheet to make sure the math works, and to keep track of all your interest rates. Then dive into the new terms to make sure origination fees, payment terms, subsidized vs unsubsidized, etc before you decide to proceed. You definitely don’t want to have something come back and bite you because you weren’t aware of the terms. And obviously, be disciplined to make sure you spend it where you’re supposed to. I personally had trouble getting Sallie Mae to apply the payments to the correct old loans, and it took some time to get it worked out properly. But the interest I saved was definitely worth the hassle.