Considering student loan consolidation? Here’s everything you’ll need to know:

If you’re one of more than 44 million Americans with student loan debt, you know that managing the repayment of those loans often feels like you’re getting nowhere. Chances are, you’re juggling multiple loans taken out in different years or semesters. On average, student loan borrowers have between three and four student loans on their financial plate. And that mix of debt might include both federal loans backed by the U.S. government, and private loans from a bank or credit union.

Staying on top of all that is no small or easy task, student loan consolidation can help you manage repaying your loans. With student loan consolidation you roll your multiple loans into one larger loan. No longer having to juggle multiple payments is a valuable time saver and stress reducer. It might also help you build stronger credit scores, as on-time debt payments, including student loans, is a significant part of determining your credit scores. You may also be able to benefit from lower loan payments through student loan consolidation, though there are trade offs to consider when seeking a lower monthly payment.

Student loan consolidation, which is also called student loan refinancing, comes in two main flavors:

  • Federal loan consolidation
  • Private loan consolidation

Federal Student Loan Consolidation are student loans backed by the U.S. government, such as Stafford loans, Perkins loans and parent PLUS loans can be consolidated into a Federal Direct Consolidation Loan. You are not permitted to add any private student loans you obtained from a bank or credit union into loans you want to consolidate through the Federal Direct Consolidation Loan program. Anyone with one or more federal student loans is eligible for the Federal Direct Consolidation Loan Program. If you are up to date on your payments, you will be able to consolidate. Your credit scores are not used to determine your eligibility. Federal student loan borrowers can choose among different repayment programs. The standard payback period is 10 years, but there are other programs where you can extend payment to 20 years or more.

Banks, credit unions and online lenders also offer student loan consolidation. Loans offered outside of the federal loan program are called “private” student loans. You can use a private consolidation loan to streamline existing private loans, existing federal loans or a combination of federal and private loans. Unlike the federal consolidation program, your finances will be pored over by a lender to determine if you qualify for a consolidation loan and what sort of deal you might be offered. The best private loan consolidation deals are typically reserved for borrowers with high credit scores. Checking your credit reports and credit scores before you apply for a private student loan will help you size up whether you will be a strong candidate for private student loan consolidation. Adding a co-signer with a strong credit history to your loan application may help you snag a better deal. That said, care is needed in considering this move. You are asking someone-Mom, Dad, your favorite aunt or uncle- to put their money on the line. A co-signer is legally responsible for making loan payments if you fall behind. Many private student consolidation loans charge a variable interest rate. If you have strong credit scores, you may qualify for an initial variable rate that is less than the permanent fixed rate you would pay on a Federal loan consolidation.

If you have good credit scores, you might qualify for a private loan with an interest rate that is less than what you would pay on a Federal student loan consolidation. And the prospect of bunching a motley crew of federal and private loans into one private consolidation loan can be a big sanity boost. Just weigh the tradeoffs when you move federal loans into a private consolidated loan. Loan features on federal loans, such as forbearance and deferment are not standard with private student loans, and you typically will not have the same range of repayment plans as offered with federal loans. If you value having more repayment flexibility, a Federal Student Consolidation loan may be the better option.

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*Individual results may vary. Please call for details and to discuss your own individual situation.

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