Consolidating Private Student Loans Has Different Rules than Federal Consolidation
Private student loans have become increasingly popular in recent years due to the rising costs of attending college. Private loans may offer a great way to supplement federal student loans, but when it comes to consolidation, they have a whole different set of rules and regulations. Before consolidating private student loans, make sure you know the differences between federal and private consolidation.
Consolidating federal student loans is a relatively easy process that requires no credit checks, no loan limits and there’s an interest rate cap of 8.25% (as of the date of this writing). Private student loan consolidation, on the other hand, doesn’t follow the federal guidelines. The individual banks make their own rules and regulations to follow when handling private loan consolidations. It’s important to point out that federal loans must be consolidated separately from private loans.
How Private Student Loan Consolidation Differs from Federal
- Your student loan balance typically needs to exceed $7,500 in order to qualify for private consolidation.
- Interest rates are variable, and they vary based on a variety of factors (i.e., credit history, market conditions, etc…).
- They cannot be combined with federal loans in order to have one consolidation loan.
- The lender will check your credit score to help determine whether you are eligible for a private loan consolidation and to determine your interest rate.
Are You a Good Candidate for Private Student Loan Consolidation?
Most experts agree that private student loan consolidation may not be an ideal option for all. Situations where it may be worth looking into include:
- Your credit score has gone up 50-100 points since you originally took out your private loans.
- You want to relieve your co-signer from their duty as the “back-up” if you should fail to make your payments and have only yourself as the payment provider.
- You want to simplify your payments each month by having just one student loan payment rather than multiple payments.
As always, remember to shop around for the best deals when searching for a private consolidation loan. Not all lenders offer these types of loans, so you may find yourself checking 3-5 different lenders before ever finding one that offers student loan consolidations.
Consolidating student loans is a way to reduce student loan payments, lower interest rates and to make student debt easier to manage. Here at Consolidating Student Loans, you'll find a wealth of information related to students loans and consolidation. Thanks for stopping by, and make sure to grab our RSS feed to stay up-to-date with the latest student loan news.
