FAQs About Private Student Loan Consolidation

The private loan debt consolidation process can be confusing, particularly for students who are just learning money-management skills. These answers should help you understand the process better.

What is loan consolidation?

Simply put, loan consolidation is replacing one or more loans with one lump-sum loan. So, students who have more than one private loan to fund their education can consolidate them into one loan, which makes the repayment process much easier.

Why would I want to consolidate my loans?

Students who have more than one loan and lender face several monthly payments after graduation. The costs can add up, particularly when a graduate is starting a career. Consolidating your loans means you'll have the convenience of just one monthly payment.

I have private student loans and federal student loans. Can I consolidate all of them into one loan?

No, for several reasons. Federal loans have different programs for consolidation than private loans. Often, federal loans have benefits and interest rates that are different from their private counterparts. Private student loan debt consolidation should be processed separately from federal.

What questions should I ask when considering to consolidate my private student loan debt?

Ask about your interest rates. Are they fixed or variable? Are they tied to your credit scores? Are there fees? Is there a prepayment penalty? Make sure to review your proposals and quotes, and ask any questions before you sign the paperwork.

Are all consolidations the same?

Every situation is different, but students who have private loans should seek competitive quotes because different programs may be available. Because a student has private loans, the interest rate was related to credit scores and current market conditions. Consolidating could actually result in a lower interest rate - because of both market conditions and perhaps a better credit rating for the student. Make sure you review your quotes and select the best consolidation program to fit your needs.

Do you know when to consolidate? Read the information we have given to help you decide.