How to Navigate the Student Loan Consolidation Process
You know that student loan consolidation has the potential to save you hundreds or thousands of dollars in student loan interest. You are determined to understand how to consolidate your own loans. The overwhelming amount of information can be difficult to navigate. But, with this complete how-to guide you will be able to differentiate between the different types of student loan consolidation available and find the best student loan consolidation company for you.
Top 3 Places To Apply For a Student Loan Consolidation
there is no reason not to apply to all 3 and compare rates
- Credit Union Student Loan Consolidation
- Private Student Loan Consolidation
- Private/Federal Student Loan Consolidation
Other options are shown below…
Your Student Loan Consolidation Options
– Private Student Loan Consolidation
If you currently have private student loan debt you will not, in general, be able to take advantage of federal loan consolidation. Fret not, though, you have plenty of options.
There are several benefits to consolidating your private student loans:
The first is, obviously, consolidation. If you are currently making monthly payments to many different loan holders, consolidation can make your life easier by combining all these loans into one thus, requiring only one payment per month.
You may be able to finance your consolidated loan at a lower interest rate than you are currently paying on your various loans combined. Typically, there are two reasons why you will be able to get a lower rate. The first depends on the economy. If interest rates are lower now than when you first received your loans, then you will benefit. Also, you may qualify for a better rate because of your own financial status. If you have been paying off debt, earning more income, and building your credit score in other ways, then you may qualify for a lower rate now.
The other benefit to consolidating your private student loans is a lower monthly payment. When you consolidate the term of your loan will re-set to the original loan term. Because you have been making payments on your loans, your new balance will be lower while your loan term will revert to the initial length. Obviously, the downside to this is that if you make only the minimum monthly payments throughout the term, you could end up paying more in interest.
– Unsecured Student Loan Consolidation
Did you take out personal loans to pay your educational or living expenses through college? These loans, which are typically guaranteed personally by you with just a signature, are considered unsecured debt. Basically, unsecured debt is debt that is not secured by anything tangible. An easy example of secured debt is a car loan. If a bank gives you a car loan and you default on that loan, the bank can repossess the car. In this way the bank has secured their money because even if you do not pay them, they can take ownership of and sell your car to collect on the debt.
This might lead you to believe that student loans are unsecured debt because there is nothing tangible offered to the bank. Actually, student loans are considered secured debt. Student loans are backed by the government. If you cease payments on your student loans, the bank can recoup the money from the government.
Consolidating your unsecured student loans, or personal loans, provides the same advantages as when consolidating private student loans; one monthly payment, the possibility of a lower interest rate, and lower monthly payments. Unsecured student loan consolidation is recommended because with the convenience of one, often lower, monthly payment you will be able to more clearly see the amount of extra money you could afford to pay per month to decrease your total debt.
– Federal Student Loan Consolidation
Offered by the federal government, the Direct Consolidation Loan allows you to combine your federal student loans into one consolidated loan.
It is important to note that there are some conditions as to which federal loans qualify for consolidation.
– Most federal student loans are eligible for consolidation
– Private loans cannot be combined with federal loans through consolidation
– PLUS loans guaranteed by your parents cannot be transferred to you during loan consolidation
– There are additional restrictions on loans in default:
– You must make payment arrangements with your current lender before consolidating
– Upon consolidation you must repay your loan under an earnings based scale
The rate of your Direct Consolidation Loan will be the average of the rates of your current loans. This interest rate will be fixed which could save you tons of money in interest, if you are consolidating loans that have variable interest rates.
How Much Will You Save?
The amount of money you will save after consolidating your student loans is largely dependent on the interest rate on your new loan.
What Are Typical Student Loan Consolidation Interest Rates?
– Private Student Loan Consolidation Rates
Current rates can vary from about 4% to about 12%. Obviously, your credit score affects the rate that you will be offered. But, did you know that the school you attended and your major area of study can also affect the rate. Banks have determined the risk factor for repayment of loans based on these statistics and, using these numbers, will increase or decrease the rate they offer.
– Unsecured Loan Consolidation Rates
Typically, unsecured loans will incur rates as high as credit card rates. To secure a minimal interest rate, consider using a home equity line of credit to pay off your student loans and then make payments on that. Home equity loans are secured by the equity in your home and rates can be as low as 3.25%.
– Federal Student Loan Consolidation Rates
As mentioned above, the rate for a Direct Consolidation Loan will be the average of the loans consolidated. It is important to note that the government guarantees that this rate will never go above 8.25%.
Now that you know your options it is time to consider where you should go for your consolidation loan. We have compiled a list of the five best student loan consolidation companies to get you started.
Direct Loan Consolidation Calculator
You can also calculate your Direct Loan Consolidation rate here:
Top 5 Student Loan Consolidation Companies
Top 2 Banks Offering Student Loans
1. Wells Fargo
Wells Fargo offers an easy to understand loan application process as well as competitive rates and terms. There is no fee for applying or early repayment. You should note that your credit will be checked during the application process for any student loan so, although there is no actual fee incurred, your credit score may decrease due to inquiries.
It is important to ask about any prepayment penalties because you will probably be extending the life of your loan when consolidating and you may want to pay off your loan before the end of that term to save money on interest.
Wells Fargo offers fixed and variable interest rates to loan consolidation applicants. They will allow you to consolidate anywhere from $5,000 to $100,000 in student loan debt.
Their competitive interest rates can be lowered through exclusive offers, such as an automatic payment rate deduction and a relationship deduction. This means that if you set up automatic payments to your loan from your checking account you can expect a discount on your interest rate. And, if you happen to have an account or establish another account with Wells Fargo, they will also reduce your rate.
Suntrust offers flexible 15, 20 and 25 year terms on student loan consolidations. They allow you to choose the term that you are most comfortable with. Extending the length of your loan can potentially drop your monthly payments significantly. Of course, unless you receive a considerable lower monthly interest rate, you may be paying more in interest over the life of the loan.
Both variable and fixed interest rates are available through Suntrust. As with most lenders, your variable rate can start off much lower than a fixed rate. Beware, there is always the concern that interest rates could spike over the term.
Like Wells Fargo, Suntrust offers discounts to applicants who agree to set up automatic payment arrangements and those who have other banking relationships with the institution.
Suntrust understands that many student loan consolidation applicants will not have had time to build up a solid credit history. Conveniently, they offer the option to have a co-signer on your consolidation loans. Asking someone who is more creditworthy than you to co-sign your loan can help you to get a lower interest rate. Understandably, whoever co-signs for you may not want their credit tied up in your loan forever. For this reason, Suntrust explains that you are able to apply for release of liability for your co-signer after holding the loan for 48 months. To accomplish this you must have a decent credit rating at the time of the request.
Three Reputable Student Loan Consolidation Companies
Convenience may be your initial reason for choosing CU Student Loans. You can read through all the information about their loans on their website at custudentloans.org. You can also apply online and even read advice about the different loan terms and interest rates they offer.
When you dig deeper you will find that the CUGrad Private Student Loan Consolidation product is really a great option. They offer competitive interest rates. Like Suntrust, CU allows you to have a co-signer on your consolidated loan. Even better, your co-signer can be eligible for release of liability after only 12 months if you have been paying your principal and interest payments on time.
Their fifteen year loan repayment option typically results in a much lower, and more simplified, all in one monthly payment.
Perhaps the best feature of the CUGrad loan is the option to make interest-only payments for up to the first four years of the life of your loan. This can mean significantly lower payments while you are establishing yourself in your career.
You can consolidate from $7,500 and up to $175,000 in student loan debt through CU. They require that you are a US citizen or permanent resident and that you graduated from a CU eligible school. To qualify you must have at least $2,000 of verifiable and consistent monthly salary and your annual income must be greater than your total student loan debt. Luckily, your co-signers income will be counted in determining this annual threshold.
- Compare the benefits of non-profit loans here
2. Cedar Education Lending
Cedar Lending offers a thorough and professional review of your current student loans before accepting your application. A representative from the company will talk to you about whether or not loan consolidation will save you money and explain how much money you can expect to save.
Their commitment to ethical lending means that you will be provided with the best option for your personal situation. You will also be made aware of exactly how many payments you will be making, what your interest rate will be, and what the amortized payment on your loan with interest will be.
Cedar’s application is available through their website at cedarlending.com. While you can navigate through their website for answers to most of your questions about loan consolidation in general and your loan in particular; they also offer more dedicated services. You can access a representative of the company through their toll free number or via email.
The main aspects the student loan consolidation process is similar to the other institutions listed in our top five. Cedar Education Lending, however, stands out among the rest with their dedication to customer service. When you work with Cedar to consolidate your private student loans you can expect personal attention and quick responses to all your questions.
With the option of choosing up to a 30 year repayment term, Student Loan Network’s private student loan consolidation product can help to greatly reduce your monthly payments.
Student Loan Network will allow you to consolidate loans from $10,000 to $100,000. Their interest rates are competitive among institutional lenders and they offer the option for a co-signer to decrease your interest rate.
If you have been struggling with your monthly payments because you have not yet actually entered the workforce, Student Loan Network may have just the solution for you. They offer a 48 month deferment to those in residence in the medical or dental field and a 36 month deferment to graduates in active duty military service. This unique offer can make a substantial impact on your current monthly financial picture.
Did we miss any that should be added to the list?