loan consolidation for private student loans

Last Updated on July 10, 2022 by Paschal Alvina

Private student loans come from banks, credit unions and online lenders, and unlike federal student loans for undergraduates, they require a credit check. That means most undergrads will need a co-signer in order to qualify. Private student loans also are more expensive than federal loans—especially now that federal loan rates are at historic lows—and typically don’t offer the flexible repayment options their federal counterparts do. In this article, we will review loan consolidation for private student loans, can you consolidate private and federal student loans, best private student loan consolidation, discover student loan consolidation, How to consolidate federal loans and should i consolidate private student loans.

What to know about consolidating federal and private student loans | Fox  Business

Private student loans are best used to pay college costs after you’ve borrowed the maximum you qualify for in both subsidized and unsubsidized federal student loans. Read on to know more on loan consolidation for private student loans, can you consolidate private and federal student loans, best private student loan consolidation, discover student loan consolidation, How to consolidate federal loans and should i consolidate private student loans.

loan consolidation for private student loans

We begin with loan consolidation for private student loans, then, can you consolidate private and federal student loans, best private student loan consolidation, discover student loan consolidation, How to consolidate federal loans and should i consolidate private student loans.

Private student debts cannot, in general, be merged with federal student loans. The reduced interest rates on government consolidation loans are not accessible to private education loans. Nevertheless, there are various methods for refinancing private college debts.

Since most private education loans do not compete on price, a private consolidation loan is essentially replacing one or more private education loans with another. So the major benefit of such a consolidation is receiving a single monthly payment. Also, as the consolidation resets the duration of the loan, this may reduce the monthly payment (at a cost, of course, of raising the total interest paid throughout the lifespan of the loan) (at a cost, of course, of increasing the total interest paid over the lifetime of the loan).

However, since the interest rates for private student loans are based on your credit score, you may be able to secure a reduced interest rate through a private consolidation loan if your credit score has improved considerably since you initially obtained the loan. For example, if you’ve graduated and now have a decent job and have been creating a strong credit history, your credit score may have increased. If your credit score has grown by 50-100 points or more, you may be able to negotiate a cheaper interest rate by consolidating your debt with another lender. You may also try talking to the existing holder of your loans, to see if they’ll cut the interest rate on your loans rather than losing your loans to another lender.

Home Equity Loans

Private school loans tend to have interest rates that are in the same ballpark as home equity loans. If your private school loan has a variable interest rate, you can consider using a fixed rate home equity loan to pay off the private education debt, essentially locking in the interest rate.

Education Lenders

The following education lenders will consolidate private education loans. These are private consolidation programs, thus the interest rates are decided by the lender, not the government. There may be additional costs paid for initiating these loans.

You should not merge your federal student loans together with your private school debts. They should be combined separately, since the federal consolidation loans offer higher benefits and cheaper interest rates for consolidating federal student loans.

When examining a private consolidation loan, inquire whether the interest rate is set or variable, whether there are any fees, and whether there are prepayment penalties.

Featured Consolidation Providers

Credible makes it quick and easy for borrowers to save on their student loans. Credible is a multi-lender platform that enables borrowers to get competitive refinancing proposals from its approved lenders. Users complete a single form, then get and evaluate individualized offers from various lenders and pick which best meets their particular financial needs. Credible is fiercely independent, devoted to offering fair and unbiased solutions in student loans.

Please be warned that the operator of this site takes advertising income from firms that appear on the site, and such compensation may effect the location and order in which the companies (and/or their products) are shown.

Consolidation Providers

Refinance your student debts and you might keep more of what you earn each month. In just 2 minutes, you may find out your unique rate and savings. Rate as low as 3.44 percent APR * Customers saved an average of $2,664 per year. Parents can also refinance loans they obtained on behalf of their children and decrease their rate by up to 3.89 percent by refinancing their Federal PLUS loans.

Save plenty of time and even more money by using LendKey to rapidly compare student loan refinancing rates from 275+ community lenders around the US. Pick the rate and monthly payment that matches your budget and enjoy unrivaled perks like early cosigner release choices, up to 18 months of unemployment protection, and more. LendKey is your loan servicer thus neither you or your information will ever be given over to a third party. No costs of any type and no commitment to accept – apply with confidence.

Fixed Rates: 2.95 percent – 8.77 percent APR

Variable Rates: 1.99 percent – 8.56 percent APR

Compare various lenders instantaneously using Private Student Loans. Find the best interest rates and advantages. Student loans offered for students, parents, and professional degree seekers. Competitive terms and advantages available-including cosigner release. Expert suggestions on borrowing you won’t find anywhere else.

Variable Rates: 2.64 percent – 12.59 percent APR (with auto-pay discount) (with auto-pay discount)

1 Fixed Rates: 4.26 percent – 13.22 percent APR (with auto-pay discount) (with auto-pay discount) 1

Please be warned that the operator of this site takes advertising money from firms that appear on the site, and such compensation effects the location and order in which the companies (and/or their products) are shown.

Additional Lenders (listed alphabetically) (listed alphabetically). Check the individual lender websites for programs and prices.

can you consolidate private and federal student loans

Next, we review can you consolidate private and federal student loans, best private student loan consolidation, discover student loan consolidation, How to consolidate federal loans and should i consolidate private student loans.

You can’t turn private student debts into federal student loans.

Consolidation is when you combine federal student debts; it doesn’t cover private loans.

You can refinance your federal and private student loans together with a private lender.

There are a few of methods to combine student loans: consolidation and refinancing. However, neither of these approaches permits you to transfer private loans into government loans.

Student debt consolidation is when you consolidate your federal student loans so you have one payment instead of numerous installments. Consolidation doesn’t cover private student debt. You can’t consolidate private student loans into a federal loan, and you can’t consolidate private student loans and federal student loans together.

Student loan refinancing is when you change private loan lenders to generally achieve a better rate or more suited conditions. You can refinance one loan or consolidate numerous debts into one loan. But refinancing is always with a private lender. So if you refinance federal debts, they become private and you lose any government advantages – including forgiveness.

You shouldn’t refinance federal student loans right now; repayment is suspended through Aug. 31. But because of low interest rates, it’s a fantastic moment to refinance private student loans. This action might cut your monthly payment or help you pay off your debts faster with a shorter term.

Federal Student Loan Consolidation - Great Lakes

How to seek relief for private student debt

You can’t make private loans federal, but you still may have some alternatives for aid if you’re struggling to make payments.

Each lender has its own initiatives for borrower help. These might include forbearance and temporarily decreased payments. Contact your lender and see what’s available to you.

Some lenders are also granting COVID-19 private student debt reduction. If you’re having a hardship due to COVID-19, be sure to bring it up to your lender.

best private student loan consolidation

Now, we find out best private student loan consolidation, discover student loan consolidation, How to consolidate federal loans and should i consolidate private student loans.

Federal student loan payments are halted at least through August, but it’s still essential understanding what your choices are for refinancing or consolidating your debts.

Advertising Disclosure: Some of the loan offerings on this site are from firms who are advertising clients of U.S. News. Advertising factors may effect where offerings appear on the site but do not affect our editorial independence.

Whether you have federal, private or both types of student loans, consolidating or refinancing them could help you lower your student debt, better manage payments and work toward other financial objectives. Too much student debt might impede your ability to save for retirement or qualify for other loans, such as a mortgage. This tutorial covers the distinctions between refinancing private student loans and consolidating federal student loans, the advantages and downsides of each, and the best solutions for particular scenarios. Keep in mind that federal student loan payments are suspended through Aug. 31, since this may impact your choice to refinance or consolidate.

No student debt refinancing firm is appropriate for every borrower. These lenders are an excellent beginning place for most people, but you should read reviews and study each firm on your own.

U.S. News recognizes the Best Loan Companies by assessing affordability, borrower qualifying requirements and customer service. Those with the greatest total ratings are regarded the best lenders.

To construct each score, we evaluate data about the lender and its loan options, giving higher weight to variables that matter most to borrowers. For student loan refinance firms, we analyze each company’s customer service ratings, refinancing fixed APR, refinancing variable APR, refinancing minimum and maximum loan periods, refinancing maximum loan amounts, refinancing minimum FICO score, product availability, and online features.

The weight each rating component receives is based on a countrywide study on what borrowers seek for in a lender.

To get a grade, lenders must offer qualified loans nationally and have a strong reputation within the industry. Read more about our process.

Find the Best Student Loan Refinance Lenders

Splash Financial is a student loan refinancing marketplace that leverages its network of banks, credit unions and other lenders to link borrowers with refinancing choices. Splash Financial is situated in Cleveland and can help U.S. citizens and permanent residents restructure federal, private and Parent PLUS loans. Splash Financial also provides a specific refinancing program for doctors and dentists finishing residencies and fellowships.

Earnest is an online lender offering private student loans to undergraduate and graduate students, as well as student loan refinancing. The firm was started in 2013. Borrowers can set their own loan conditions to cover up to the entire cost of their education.

Laurel Road provides refinancing for undergraduate and some associate degrees, but is not granting graduate loans for the 2022-2023 academic year. Parent loan refinancing through Laurel Road permits refinancing of federal parent and private parent loans, and provides qualified kids the chance to assume the debt. In 2019, Laurel Road became part of KeyBank, which offers community and corporate banking services. Laurel Road’s student loans are handled via the Higher Education Loan Authority of the State of Missouri, often known as MOHELA, and the corporation is based in New York City.

SoFi is an internet lender formed by Stanford business school students in 2011. Originally focused on student loan refinancing, the San Francisco-based startup added private student loans in 2019. Choose from undergraduate, graduate, law or MBA, health profession, or parent loans with no fees.

Nelnet Bank, created in 2020 by Nelnet – one of the top servicers of federal student loans — offers private student loans and refinance possibilities. Private student loans have co-signer release, plus a choice of many repayment options and interest rate discounts if you set up automated payments. Nelnet Bank can refinance a Parent Direct PLUS Loan into a student’s own name.

Citizens Bank was created in the late 1800s in Rhode Island. Today, it’s one of the major commercial banks in the U.S. Branches are located in the New England, mid-Atlantic and Midwest areas.

Founded in 2014, Purefy is a student loan refinancing rate comparison service, and it also originates refinanced student and parent loans via a relationship with Pentagon Federal Credit Union. As a rate comparison tool, Purefy offers interest rates and conditions from loan partners, including Earnest, ISL Education Lending and College Ave. This lender evaluation will focus on the loan refinancing alternatives Purefy and PenFed provide together.

LendKey’s internet platform links borrowers who require private education loans or refinancing loans with credit unions and community banks. Since 2009, LendKey has assisted more than 135,000 people by providing $5 billion in loans. The organization offers fixed- and variable-rate loans for undergraduate and graduate students.

Credible is a loan comparison platform that allows would-be borrowers to shop around for loans that match their needs – including mortgages, home refinancing, student loans, student loan refinancing and personal loans. The startup was created in 2013 in San Francisco as a platform to allow borrowers to shop rates and goods.

College Ave solely offers student loans. Founded in 2014 and located in Wilmington, Delaware, College Ave offers undergraduate, graduate and parent loans for students enrolled at institutions connected with College Ave in all 50 states and the District of Columbia. College Ave’s edge is speed, with applications that take a few minutes to complete and fast judgments.

Several top-scoring student debt refinancing providers in the U.S. News database have boosted their APRs.

Among student loan refinancing businesses that achieved a U.S. News score of 4.5 stars or better, fiveout of six upped their minimum fixed APRs since June. Three lenders also boosted their maximum fixed APRs. At the same time, two lenders upped the minimum and maximum variable APRs for their refinancing packages.

Make sure you browse around to obtain the greatest cost available. Good credit also can help you acquire a more competitive rate, so pay your payments on time and keep your credit card balances low.

When you refinance student loans, a private lender repays your previous loan, or loans, and offers a new loan based in part on your creditworthiness that can help you achieve a cheaper interest rate. If you can qualify for a better rate, you might save money and earn reduced monthly payments. The federal government does not provide refinancing for federal student loans, and refinancing these loans with a private lender will leave you ineligible for any advantages you may have enjoyed.

Consolidating student debts implies consolidating various loans into one monthly payment. You can consolidate federal debts through the U.S. Department of Education. With a Direct Consolidation Loan, you will have one monthly payment with a fixed interest rate that is the weighted average of your prior rates, rounded up to the closest one-eighth of a point.

Find the Student Loan That’s Right for You

Refinancing student loans might save you money, but it can be tough to evaluate if you should refinance. Note that these advantages and downsides pertain to refinancing student loans and may not be relevant to borrowers considering combining their federal loans.

Many criteria, including your income, debt, job and credit might decide whether you are able to refinance a private student loan. You’ll want to prequalify with more than one lender so you may compare offers before filing an official application.

You can refinance federal student loans through private lenders, but it’s not always a wise choice. That’s because you might lose access to advantages such government income-based repayment plans and student debt forgiveness programs.

Federal Student Loan Consolidation

Eligible borrowers can apply for a Direct Consolidation Loan online or by mail. Consolidating your federal student loans needs no hard credit check and might allow you access to more flexible repayment choices and Public Service Loan Forgiveness.

Rather than consolidating your student debts, you might try altering repayment plans to prolong your loan terms and earn lower monthly payments. But this also won’t cut the total cost of borrowing.

U.S. News Survey: Student Loan Payments Can Hinder Retirement Savings and Personal Goals

Many borrowers don’t regret having student loans and haven’t investigated refinancing them for savings, according to a U.S. News study of consumers with federal or private student loans. They indicated how much they borrowed, if their payments are manageable and other facts about how their student loans have influenced their lives.

Additional Survey Insights

Higher over 11 percent of respondents have student debt amounts more than $50,000.

Higher over 11 percent of respondents have student debt amounts more than $50,000.

Seventy-three percent of respondents have had to postpone important life objectives, including 37.9 percent of persons who have put off buying a house. Only 27 percent of respondents haven’t had their plans considerably delayed due of school loans.

Seventy-three percent of respondents have had to postpone important life objectives, including 37.9 percent of persons who have put off buying a house. Only 27 percent of respondents haven’t had their plans considerably delayed due of school loans.

Higher over 11 percent of respondents have student debt amounts more than $50,000.

Higher over 11 percent of respondents have student debt amounts more than $50,000.

Seventy-three percent of respondents have had to postpone important life objectives, including 37.9 percent of persons who have put off buying a house. Only 27 percent of respondents haven’t had their plans considerably delayed due of school loans.

Seventy-three percent of respondents have had to postpone important life objectives, including 37.9 percent of persons who have put off buying a house. Only 27 percent of respondents haven’t had their plans considerably delayed due of school loans.

U.S. News Survey Methodology

Before you start with consolidating or refinancing, confirm that your debts are qualified and make sure your pick is the best match.

Federal Student Loan Consolidation Eligibility

Most federal debts are eligible for federal student loan consolidation. You will normally be eligible to combine a federal student loan once you graduate or otherwise leave school, or if your attendance drops below half time.

Private Student Loan Refinance Eligibility

Eligibility can vary by lender, however many private student debt refinancing organizations frequently look at these factors:

Also, lenders may ask you to satisfy other requirements for refinancing student loans. If you can’t qualify on your own, some lenders could accept you with a creditworthy co-signer. Lenders might also restrict refinancing to people who:

How quickly can you refinance student loans? You’re not likely to obtain accepted for refinancing while still in school. Once you graduate and get a job, you should be eligible to refinance, and there are additional refinancing possibilities for debtors who did not graduate.

Parent PLUS Loan Refinance Eligibility

Parents may refinance student debt, too. When you refinance Parent PLUS loans or private parent loans, you might cut your interest rate, transfer the debt to your kid or both.

“You don’t lose as many perks when refinancing a federal Parent PLUS loan into a private loan as parent borrowers are not eligible for income-driven repayment plans and Public Service Loan Forgiveness,” Kantrowitz explains.

Use this infographic to compare merging federal student debt with private student loan refinancing.

Consolidation does nothing for your interest rate, but it does make your debts easier to handle, says Travis Hornsby, CEO of Student Loan Planner, a consulting service that helps borrowers with at least $20,000 in student loan debt.

Student debt consolidation might make sense if:

On the other side, student loan refinancing makes sense “if you’re seeking to minimize your interest rate and you need to pay off your debt in full,” Hornsby adds. Refinancing your student loans with a private lender might be a smart choice as long as:

If you’ve concluded that student loan refinancing is the correct plan for your financial position, you may be ready to begin the loan shopping and application process. Here’s what that looks like:

Congratulations! You just graduated and were recruited for your first job earning $65,000 a year in San Francisco.

Say you have three federal direct subsidized loans: one for $10,000, one for $6,000 and the other for $5,000, and the interest rates on those loans are 3.73 percent , 2.75 percent and 4.53 percent , respectively (these are the three most recent fixed interest rates for direct subsidized loans for undergraduates – the rate updates each year). To pay back your student debt under the typical repayment plan, you will spend 10 years and around $25,000, including interest.

Here’s how this scenario may alter by either merging your government debts or refinancing them with a private lender. All amounts are rounded to the closest dollar.

Be important to compare the monthly payment with the overall cost when you are contemplating consolidating or refinancing student loans, Kantrowitz adds. Your monthly payment might be lower – sometimes much lower – but you could spend hundreds of dollars more in interest.

How to consolidate federal loans

Log in to studentloans.gov and click on “Complete Consolidation Loan Application and Promissory Note.” You’ll need to finish the application in one session, so gather the papers indicated in the “What do I need?” section before you start and set aside around 30 minutes to fill it out.

  1. Enter which loans you do — and do not — want to consolidate.
  2. Choose a repayment plan. You may either acquire a repayment schedule based on your loan balance or select one that connects payments to income. If you chose an income-driven plan, you’ll fill out an Income-Driven Repayment Plan Request form next.
  3. Read the conditions before submitting the form online. Continue making student loan payments as normal until your servicer certifies consolidation is complete.

If your debts are in default, consolidation is one of a few strategies to get your loans back on track. To consolidate defaulted debts you’ll need to make three full, on-time consecutive monthly payments on the defaulted loan and agree to participate in an income-driven repayment plan.

If you’re considering either federal or private student loan consolidation in order to receive a dramatically reduced loan amount, investigate more into income-driven repayment instead.

The government provides options that lower payments to 10 percent or 15 percent of “discretionary” income and grant forgiveness on the remaining sum after 20 or 25 years. You may join up for free on studentloans.gov.

If you have a big loan load and a low income, income-driven repayment is usually your best option for the lowest monthly bill.

should i consolidate private student loans

Consolidating private debts into a private consolidation loan may be a good choice if you receive a better offer.

Private consolidation loans combine numerous current private student loans into one bigger loan — you are replacing your original private student loans with this new loan. You will have a single monthly payment for your new private consolidation loan, which may be simpler to keep track of. Private student lenders may provide an interest rate decrease for creditworthy customers wanting to combine their private student loans. This can save you money throughout the duration of your loan.

TIP: Read the tiny print – your merged loan may not have the same terms as your original loans.

Private consolidation loans may have variable interest rates – meaning your interest rate might go up and decrease during the term of the loan. The interest rate charged by the lender will depend on your credit score. The payback period, or maximum number of years you have to repay the loan, can range from 10 to 25 years depending on the lender and the total value of the loans being combined.

Private school loans tend to have interest rates that are in the same ballpark as home equity loans. If your private school loan has a variable interest rate, you can consider using a fixed rate home equity loan to pay off the private education debt, essentially locking in the interest rate. Credible makes it quick and easy for borrowers to save on their student loans. Use LendKey to rapidly compare student loan refinancing rates from 275+ community lenders. Credible takes advertising income from firms that appear on the site, and such compensation effects the location and order in which the companies (and/or their products) are shown.