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My employer has offered to pay off my student loans.

The problem is, they are only able to deposit the money in a single loan account. It is split across different companies. My employer can't pay into multiple accounts, so I must consolidate my loans. But the payments won't be immediate, this will take 2 years, so the loans won't disappear immediately.

When consolidating, will the type of loan change, possibly changing some advantages of the loan type? For instance, currently student loans are in forbearance, nation-wide, would consolidation affect that? In other words, are there disadvantages to consolidating?

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    Federal loans or private loans? Pay them off in one lump sum? Can you consolidate them just before the employer is ready to make the payment? What if your employer decides not to pay the loans?
    – RonJohn
    Jul 29, 2021 at 13:08
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    I don't think they'd still be federal loans... Even if they can only deposit money into one account, can you change the account they pay into (just like you can change your Direct Deposit checking account)? Thus, consolidation would not be necessary.
    – RonJohn
    Jul 29, 2021 at 13:17
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    Ah. What about if you consolidate on an as-needed basis?
    – RonJohn
    Jul 29, 2021 at 13:30
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    studentaid.gov/app/launchConsolidation.action I'd ask these people if the consolidated loan is still a federal loan
    – RonJohn
    Jul 29, 2021 at 13:33
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    Is the employer willing to pay off one account at a time?
    – MonkeyZeus
    Jul 29, 2021 at 17:31

4 Answers 4

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You lose significant rights doing a private consolidation of federal loans.

You lose few if any rights doing a federal consolidation. Because you anticipate your employer will pay off all of your loans, a federal consolidation into a single loan may be worth doing, (if required to qualify for your employer's program).

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You have to weight the risks and gains for each variant:
For federal loans, there might be some partial or total forgiveness one day. Could be you get something from that, but could also be that it never happens;it’s too late for you; or you are not affected - the probability is your guess. By consolidating them now you will lose this potential gain.

On the other hand is the risk that your employer does not follow through or you leave the company before the two years are up. Again, the probability is your guess.

For me, it would be clear that unless your employer is a bit shady, I would go for it and be rid of all loans in two years.

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    Even if the employer isn't shady, anything may happen in two years. Too risky.
    – o0'.
    Jul 29, 2021 at 22:07
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    @o0'. But you potentially get your loans paid off - the chance that congress waives them is probably a lot smaller.
    – Aganju
    Jul 30, 2021 at 0:02
  • Much smaller. I'm talking about the risk of losing rights.
    – o0'.
    Jul 30, 2021 at 7:25
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    E.g. two years ago, who would have predicted a pandemic? But only a complete pessimist would forego such a large windfall on the small chance that a disaster will prevent it in the next 2 years.
    – Barmar
    Jul 30, 2021 at 14:42
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Assuming you stay with the employer for 2 years and they pay your consolidated loan for 2 years then the terms of the consolidated loan practically do not matter.

The only possible fine-print item which could matter is a pre-payment fee. If the loan doesn't allow you to pay it off early then that could be seen as a disadvantage.

Aside from that, congrats and try not to get fired!

This is really nothing more than a risk/reward situation. If you expect to be paying the loan on your own then you need to read the terms-and-conditions of your current and potentially consolidated loan carefully.

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The main advantage you'll lose by consolidating your debts is that you lose the potential options from selectively repaying specific ones early and (unless the rules changed from when I did it) for federal loans end up paying a weighted average of the rate across all your individual loans.

Generally what you'd want to do there is to repay the highest interest rate ones first to minimize the total amount of interest paid; although there are also arguments made in favor of paying off the smallest ones first. (This has been argued to death here before, please don't restart it on my answer.)

If your individual balances are all small enough that you'd be losing thousands of dollars out of each payoff event though the gain from capturing all of that is almost certain to be larger than the what you might be able to get later by keeping them separate.

Is incrementally consolidating an option? By this I mean instead of consolidating everything into a single account, just consolidate enough prior to each payment that you've got a single account with a balance greater than the lump sum you have incoming; and then just repeat the process.

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