Consolidating Your Private Student Loans
Refinancing may be beneficial for you. You may want to think about refinancing if you are:
- Having trouble making your monthly payments.
- Not eligible for more deferment or forbearance and are worried about defaulting.
If you are comfortable with your monthly payments, it probably does not make sense for you to refinance.
Private loan refinancing is only for your private student loans, and is different from federal student loan consolidation. Private and federal student loans cannot be refinanced or consolidated together.
The lender you choose to refinance your loans essentially buys all of your loans from the original lenders and reissues you a new loan, leaving you with one loan for the total amount of loans consolidated.
If you choose a different repayment plan when you consolidate, this may result in a smaller monthly payment with a longer repayment schedule and, subsequently, a lower risk of default.
Eligibility for private loan consolidation vary by lender. Many lenders will require that you have a minimum balance (typically $7,500) to consolidate your loan.
Benefits and drawbacks
- You obtain a single monthly payment instead of several.
- The consolidation resets the term of the loan, which may reduce your monthly payment.
- Because the interest rates on private student loans are based on your credit score, you could get a better monthly interest rate if your credit score has improved significantly—by 50 to 100 points—since the time you first obtained the loan.
- The current lender of your loans may be willing to lower your interest rate, rather than lose your loans to another lender.
- While your monthly payment may decrease, the total interest you pay over the lifetime of the loan may increase (unless your credit score significantly improves).
Who consolidates private loans?
The following lenders consolidate private student loans:
- Cedar Education Lending
- BND Student Loan Services
- Next Student
- StudentLoan Consolidator
Detailed eligibility criteria, the amount of the loan, and repayment period vary depending on the lender, and it is always a good idea to check with the lender for the most recent information.
Important things to ask when consolidating private loans
When consolidating your private loans, always ask the lender the following questions, and read the fine print:
- Is the interest rate fixed or variable?
- Are there any fees?
- Are there pre-payment penalties?
- Do you have discounts for auto-payment?
- Do you have discounts for on-time payments?
- Can I pay by credit card with no additional fee?
How to apply
To apply for consolidation of your private loans, contact a private lender directly.