Personal Student Loan Consolidation
Private student loans cover all aspects of a college student's expenses. By contrast, a Stafford loan is typically put towards paying tuition. It doesn't cover all college expenses. A private student loan is also based upon the credit history of the applicant rather than the need like a Federal PLUS loan.
Consolidation of a Private Student Loan
A private student loan cannot be consolidated with any federal student loans. The interest rates that are available for federal loans can't be matched with private student loans. However, if you have multiple private student loans, you may be able to consolidate those. This would allow you to lower your monthly payment for the loans. It would also reset the term of the loan -- giving you more time to repay the loan.
Another advantage to consolidating your private student loans is that, unlike federal loans, the interest rate is affected by your credit score. If you have a better credit score than you did when you took out the private loan -- you've been generating more income with a job, paying off your bills on time, etc -- you will see a better interest rate by consolidating. Your credit score will typically only have to increase by 50 to 100 points for you to see a better interest rate.
If you do decide to go for a private student loan consolidation, make sure to consider whether the new interest rate is variable or fixed, whether there are any prepayment penalties, and what types of fees are involved.
Things to Consider For Non-Federal Student Loan Consolidation
- Sometimes, contacting your current lender to find out if they'll lower your interest rather than losing you as a customer is a good first step to lowering your monthly payments on the loan.
- If your current private student loan has an adjustable rate, consider using a fixed-rate home equity loan to pay off the private student loan. This will allow you to lock in a lower interest rate.
- If you have them, consider federal student loan consolidation along with the ideas listed here.
