Tuesday, June 18, 2024

Can You Consolidate Private Student Loans

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Refinance Private And Federal Loans Together

Should I Consolidate My Student Loans?

So, although you cannot consolidate federal and private loans together, you can refinance them. With the option of lower interest rates, this could save you a substantial sum of money. However, it could also cause you to lose flexible repayment options. Always be sure to read over the conditions of a loan agreement very carefully before signing, and shop around to choose the lender that best fits your financial needs!

What To Look For When You Consolidate

Before you even start to think about consolidating, make sure you have a good track record of on-time payments, a stable job and a credit score that’s in the good to excellent range. Typically, you need to have a to refinance your student loans. If you’re missing any of these components, you may need to get a co-signer, such as a parent.

When you’re looking to consolidate, Aliche recommends focusing on finding a solution where you have fewer payments than you had before. Do your homework and explore the refinancing options with multiple lenders. It’s also worth exploring the lender’s track record with customer service. There are several online tools that can help you compare lenders’ reviews and rates side-by-side and the Consumer Financial Protection Bureau has a consumer complaint database that includes student loan lenders.

Additionally, make sure you read the fine print and that you understand all of the loan terms. “Ask the questions,” Aliche says. Some lenders provide flexible options for repayment, including options to make interest-only payments and an interest rate reduction after a certain percentage of the principal has been paid off. But if you default, you may be on the hook for expensive fees from collection agencies.

Your Guide To Consolidating Private Student Loans

In this article:

Consolidating your private student loans simplifies how you manage your debts.

Instead of paying many lenders, you only pay one.

Additionally, not only is consolidation convenient, but it also saves you money. Thats because lenders often offer to consolidate your loans with lower interest rates, thus lowering your total cost.

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What To Know About Refinancing Private Student Loans

While you may not be able to consolidate private student loans into a Direct Consolidation Loan, you do have the option to refinance them through a private lender, which can offer similar benefits to federal student loan consolidation. You can also refinance if you have a mix of federal and private student loans and want to combine them all into one loan.

The private lender will pay off all your existing student loans and issue you a new one with new terms and a new interest rate. Lenders will consider your credit score, income, employment history, and other factors to determine what rate and terms to offer you.

Credible makes it easy to compare student loan refinance rates from various lenders.

Do You Have To Consolidate Loans For Pslf

Consolidate Federal and Private Student Loans

Youâll need to consolidate your loans to qualify for Public Service Loan Forgiveness if you have FFEL or Perkins Loans. Parent PLUS Loan borrowers may also need to consolidate so they can qualify for a PSLF eligible-repayment plan: income-contingent repayment.

If all of your loans are Direct Loans, consolidation may not be necessary. But you may still want to do so to have one loan servicer, one payment, and lower monthly payments.

What if the only loan I have is an FFEL Consolidation Loan? While it seems wonky, you can still consolidate the loan into a Direct Consolidation Loan â even if you donât have any other loans to add to the application. What youâre effectively doing is refinancing the loan with the Education Department.

Learn More:Do FFEL Loans Qualify for PSLF?

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Can You Consolidate Private Student Loans: Faqs

Is it a good idea to consolidate private student loans?

If you want to make one easy payment each month on your student debt, consolidation can be an excellent choice. If your goal for consolidation is to pay less each month, youll want to remember that youll end up paying more in interest overall.

Can you consolidate private student loans and federal student loans together?

Yes, you can consolidate private and federal student loans together with a private consolidation loan. You cannot consolidate private and federal loans together with a Direct Consolidation Loan, which only applies to federal loans. You should only consolidate your federal loans with a private loan after careful consideration, since you will lose eligibility for beneficial government programs.

Can you get private student loans forgiven?

Private loans do not qualify for the governments student loan forgiveness programs. However, some private lenders will consider discharging a debt balance in the event of permanent disability or death.

Is there a downside to consolidating private student loans?

The primary downside of consolidating your private student loans is that it can result in your paying more money in the long-term. If you decide to consolidate but continue paying the same amount each month that you were paying in total before, you can avoid this pitfall.

Does student loan consolidation hurt your credit?

Converting Private Debt For Borrowers Still In School

The borrowers still in school have a couple of options to convert private debt into federal debt.

Many college students borrow both federal and private loans during school. Students who are careful with their spending may have extra student loan money at the end of the semester. Instead of paying back federal loans or borrowing less federal loans in the future, these students should pay down their private loans. The goal should be to maximize federal borrowing before taking on any additional private debt.

A similar approach applies to employed students. Suppose a student puts in a ton of hours at their summer job after their second year of school. This income could allow the student to borrow less money in the following year. A better approach might be to use the money to pay down existing private student loans. This student may need to borrow more federal loans the following year, but they will have less private debt.

This strategy can be especially useful for borrowers impacted by the strict borrowing limits for students just starting college. Graduate students, who have much higher federal borrowing limits, can transform vast amounts of private loans from undergrad into federal debt.

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What Is Federal Student Loan Consolidation

Federal student loan consolidation blends all of your existing federal loans into one new loan with a term ranging between 10 and 30 years. With federal student loan consolidation, you will have only one loan payment due to one loan servicer each month with a new fixed rate. Heres more on how it works.

College Ave Student Loans

$128,000 Student Loan. Should I Consolidate?

College Ave Student Loans is a student loan refinancing company that can help you save money on your student loans. If you are looking for a good option, College Ave Student Loans can be a great choice for managing your debt and reducing your monthly payments.

They will consider refinancing all types of private student loans, including federal and private loans, graduate school and consolidation loans. If you have multiple private student loans from different lenders with high interest rates, College Ave Student Loans may be able to lower them to one single payment at an affordable rate.

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Can You Consolidate Student Loans During The Covid

Yes, you can consolidate your student loans however, whether this is a good idea will mainly depend on what type of student loans you have.

  • If you have private student loans, consolidating them with a private lender could get you a lower interest rate or reduced monthly payment, which could help you manage your loans more easily during the COVID-19 pandemic. Also keep in mind thatcurrent student loan refinance rateshave fallen dramatically, which means you might qualify for a much lower rate than what you have right now.

  • If you have federal student loans, its likely better to wait before consolidating with a private lender. Due to the pandemic, federals student loan payments and interest accrual have beensuspended through at least Sept. 30, 2021If you consolidate your federal student loans with a private lender, youll lose access to this suspension as well as to other federal benefits and protections, such as income-driven repayment and student loan forgiveness programs.

Another option is toconsolidate your federal student loansthrough a federal Direct Consolidation Loan. While your interest rate wont change, you could opt to extend your repayment term up to 30 years, likely getting you a lower monthly payment. Just remember that a longer term means paying more in interest over time.

Get A Single Fixed Interest Rate

One of the hardest parts of paying back several different lenders is keeping track of all your statements, repayment terms, and interest rates. With consolidation, though, you pay only one lender with a single fixed interest rate.

Keep in mind, though it makes paying your loan easier, direct student loan consolidation does not save you any money. Your new interest rate with a direct consolidation loan is simply a weighted average of your existing rates.

This means that your interest rates will be more or less averaged together, with the resulting rate leaning more heavily toward that of your bigger loans. Try using a weighted interest rate calculator to get a feel for what your post-consolidation rate will be.

Note: Keep in mind that your final weighted interest rate will be rounded up to the nearest one-eighth of 1%. If the calculator shows you a 5.67% weighted interest rate, for example, that will translate to a post-consolidation rate of 5.75% when alls said and done.

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How Does It Work

Debt consolidation is a common service offered by many lenders, for student loans and many other type of debt. The primary type of debt consolidation is a consolidation loan.

With a consolidation loan, you essentially take out a large loanone thats equal to your total outstanding debts.

For example: you have a $5,000 private student loan from Lender A, and a $6,000 private student loan from Lender B. You could take out an $11,000 consolidation loan from Lender C. You use the new consolidation loan to pay off your old loans. Now, youre only making one monthly payment.

Different types of lenders issue consolidation loans, including brick-and-mortar banks and online lending services. You can even use a home equity loan if you own a house.

How Can I Consolidate All My Private Student Loans

How To Best Consolidate Student Loans  FindItLocal

Dear Steve,

I’m looking to consolidate private/government student loans.

I have a few several outstanding loans with both public and private entities from graduate school . is there a way to consolidate these all into one single debt/monthly payment?


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Dear Peter,

If it was just about government student loans then the answer would be an easy, ‘Yes.’ There is no charge to consolidate most government student loans into a Direct Consolidation Loan which is then eligible for a monthly payment based on your income. These payments can be as low as $0 per month if your income is low. It is easy-peasy no-brainer.

But when it comes to private student loans, people are always getting confused and think they are like government student loans. They are truly apples and flashlights.

A private student loan is a closer cousin to your car loan than your government student loan. Except for some protections from bankruptcy in a few situations, the loan is just a vanilla closed-end consumer loan. But let’s not forget, some private student loans are dischargeable in bankruptcy even today.

Private student loan holders are neither required to allow you to consolidate them or make it easy for you to do so.

If you don’t have a lot of private student loan debt, you can wrap them up in an unsecured debt consolidation loan like those from LendingClub.com

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Is Student Loan Consolidation Right For You

Whether you have federal student loans, private student loans or both, consolidation could be a good fit for you if youre looking to simplify repayment and ease the burden of numerous due dates and loan servicers.

Federal student loan consolidation via a Direct consolidation loan can also lower your payments , but can result in higher interest charges over time.

Consolidating and refinancing with a private lender, on the other hand, could lower your monthly payments or save you money on interest or maybe even accomplish both.

Before making changes to your student loans, make sure you understand the ins and outs of both types of consolidation. By doing your due diligence, youll have a clear sense of how consolidation or refinancing will affect your costs of borrowing over the life of your loans.

Student Loan Refinancing Vs Consolidation

Purpose Move all loans into one easy payment get a lower interest rate change repayment terms Move federal loans into one easy payment move into alternative federal repayment plans extend repayment timeline
Benefits Potentially lower interest rate streamline student loan payments Potentially lower monthly payment keep track of one monthly bill
Drawbacks Lose federal benefits credit check required for borrowers and co-signers lower interest rate not guaranteed Interest rate doesnt change longer repayment terms means more paid toward interest in total
Best for Borrowers with private student loans and borrowers with good credit Federal student loan borrowers and those who need a longer repayment term

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You Can Lower Your Interest Rate

Refinancing to a lower interest rate can result in paying less interest over the life of the loan.

Heres how it works. Lets say you owe $50,000 with an 8% interest rate and a 10-year term, and your spouse owes $60,000 with a 9% interest rate and a 10-year term. If you consolidate and refinance those loans into one loan with a 5% interest rate and a 10-year term, youll pay $24,033 less in total interest over the life of the loan. Your monthly payment will also be $200.28 less.

While individuals can refinance student loans separately, refinancing together can occasionally lead to greater savings. For example, if one partner has an excellent credit score and the other has a low credit score, consolidating may help the latter qualify for a better interest rate.

If one spouse is a stay-at-home parent with no earned income, their only chance of qualifying for student loan refinancing may be to add the other person as a cosigner or to consolidate loans.

Consolidating Private Student Loans

When Is It Smart To Consolidate Student Loan Debt?

The process for consolidating private student loans is focused around your credit score. If your credit score has improved dramatically since graduation, you may be in line for a lower interest rate. Home equity loans are another way to consolidate a lower interest rate. There also could be a variable interest rate loan that suits your situation. Contact several lenders before making a final decision on consolidating your student loans through a private lender.

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You Can Reduce Your Monthly Payment Or Overall Cost

With student loan refinancing, you can reduce your monthly payment in two ways: qualifying for a lower interest rate or extending your repayment term.

With a lower rate, youll likely pay less interest over the length of your loan, reducing your overall loan cost and helping you save money.

If youre looking for a more affordable monthly payment, extending your repayment term may be right for you. Keep in mind, extending the loan term will increase the amount of interest, and overall loan cost.

Why Refinance Student Loans

Refinancing private or federal student loans gives borrowers one monthly payment to one lender as opposed to several. Refinancing can also earn borrowers a lower interest rate. This will save you money over time.

See also: How often can you refinance student loans?

Keep in mind, however, that refinancing federal loans will cause you to lose access to the benefits that come with them. Youll lose access to income-driven repayment plans, Public Service Loan Forgiveness, and lenient deferment and forbearance options. If you plan on taking advantage of any federal student loan benefits, you can refinance only your private loans and keep your federal loans.

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What Does It Cost To Consolidate Student Loans

Federal loans fall under No Cost Consolidation – meaning there are no fees to consolidate your federal student loans. While there may be costs associated with a higher interest rate in the long term, there are no upfront fees for loan consolidation.

Some private lenders may have a cost associated with refinancing and consolidating your student debt, but that varies from lender to lender.

The Benefits Of Consolidating And Refinancing

Pros and Cons of Student Loan Consolidation

One very obvious benefit of consolidating your loans is the ability to easily track your loan amounts, bills, and debt. If you previously had 3 to 4 loans, that could be a handful to keep on top of. After consolidation, youll only have one loan to worry about.

Refinancing also gives you the opportunity to possibly get a lower interest rate, especially when it comes to the original private loans. If youre refinancing after graduation with a job and good credit, you could find that rate significantly dropped. This could equal smaller payments or less time needed to pay off the loan amount.

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