Consolidating your student loan debt can help make your monthly payments manageable by either altering the repayment timeframe or, for private loans, lowering your monthly interest rate. Whether you have federal or private loans, there are several options available to consolidate your loans and ease the burden of education-related debt.
What to Consolidate
Traditional loan consolidation is available for both federal and private loans. It is important to note, however, that consolidating federal loans does not lower your interest rate, it just allows you to make one simple payment. This is because federal rates are fixed and when consolidating, the servicer uses a weighted average of all the loans to create a single new interest rate.
While you can transfer federal student loans to a private company, the rates are usually much higher so it’s most likely better to keep your federal loans. Consolidating your private loans allows you to refinance the interest rate of several loans, ideally lowering your monthly payment amount.
When to Consolidate
Consider consolidating your private loans if you’d like to lower your monthly payments. Because private lenders base their interest rates on your credit history, you may qualify for lower rates if your credit score has increased or if you’ve simply established credit since taking out the loan as a student. Many pre-approvals only require a soft inquiry on your credit report, so you can preview your rates without actually affecting your credit.
Another time to consider consolidating is if your loan has an adjustable interest rate. If your rate is about to go up or has already done so, shop around for fixed rates that will give you a stable monthly payment amount. Finally, consider consolidating or refinancing your student loans if you have a cosigner on your loan.
You can usually apply to have this person removed from the responsibility of your debt after you’ve worked for a few years, have a steady income and have made consistent, timely payments on your loan.
What to Consolidate
Traditional loan consolidation is available for both federal and private loans. It is important to note, however, that consolidating federal loans does not lower your interest rate, it just allows you to make one simple payment. This is because federal rates are fixed and when consolidating, the servicer uses a weighted average of all the loans to create a single new interest rate.
While you can transfer federal student loans to a private company, the rates are usually much higher so it’s most likely better to keep your federal loans. Consolidating your private loans allows you to refinance the interest rate of several loans, ideally lowering your monthly payment amount.
When to Consolidate
Consider consolidating your private loans if you’d like to lower your monthly payments. Because private lenders base their interest rates on your credit history, you may qualify for lower rates if your credit score has increased or if you’ve simply established credit since taking out the loan as a student. Many pre-approvals only require a soft inquiry on your credit report, so you can preview your rates without actually affecting your credit.
Another time to consider consolidating is if your loan has an adjustable interest rate. If your rate is about to go up or has already done so, shop around for fixed rates that will give you a stable monthly payment amount. Finally, consider consolidating or refinancing your student loans if you have a cosigner on your loan.
You can usually apply to have this person removed from the responsibility of your debt after you’ve worked for a few years, have a steady income and have made consistent, timely payments on your loan.